401K Withdrawl question?

I have a 401k with Nordstrom. I was employed there over the summer. Now they told me I have 30 days to do something with my funds it or I would receive a distribution of the funds (I think). The reason they are doing this is because the amount is so little, it’s $175. So my question is should I just take the money and pay the penalties or should I do a rollover into a completely new account that I would set up and what sort of account would be recommended?
I have another account with the Teacher Retirement System of Texas. Again, I don’t have a lot of money invested here, but I do have some. Also, I am no longer employed with them and I am now working for a company with no retirement plan. I guess it’s more complicated than I thought.
Help?
Oh, one more thing, I have a mutual fund (Captial growth, I think) account with Franklin-Templeton with quite a bit of money invested here. Can I invest it in this? I spoke with them about setting up an IRA, but they mentioned yearly fees. 🙁

I normally tell people never take money out of a 401(k). However in your case if the total funds in the 401(k) is $175.00 I’d prob just pay the 10% penalty (not 20%) (assuming your under 59 1/2), and the full amount would be added to your income for the year in which it was taken out.

http://www.irs.gov/faqs/faq-kw7.html

If you roll it over into a Roth IRA, the ENTIRE amount would be subject to the same ordinary income and the 10% penalty. Roth IRA does not avoid the tax on the 401(k) money.

If you really want to tax defer the $175.00, then you will have to open a "Standard Rollover IRA." If there are any fees on the account, it just wouldn’t justify the move.

I would open a Roth IRA, and contribute after tax cash, then invest your other funds or better yet, have an S&P 500 Index fund for a long term investment strategy.

http://en.wikipedia.org/wiki/S&P_500

Look for a no fee IRA or Roth IRA account for your other monies.

Here is one:
http://personal.fidelity.com/products/retirement/getstart/open_nofee_ira.shtml.cvsr