I left my old employer on 3/10/2014, however, I left my 401k there. Today I received an email indicating that they over-paid into my account $500 and that i need to identify which funds I want to liquidate in order to pay them back. While i certainly have no problem giving them the money back, what do i need to do to protect myself? I plan on rolling that old 401K over to my new employer in August of this year. They said I have to make a decision by Wednesday (gave me 48 hours). Can they even do that? Can they take the $ out without my giving written permission?
You definitely need more information. This could be a number of things. First of all I don't understand the reason for the 48 hours. I would definitely ask them to clarify why this is the case. Why are they noticing this a year later?
You are indeed a participant in the company 401k. the plan is theirs, and you are agreeing to play by their rules when you enroll. I would call HR and get more info.
This could be excess contribution or a "bank error in your favor" that they have found. It sounds like they over matched your 401k sense they want the money back.