Monthly Archives: October 2017

Laid off? Plan, rather than panic!

It is nice to be employed. Employment comes with various benefits, money is the most essential one. But in United States, employment can be terminated at any time for business reasons. It is hard to accept, that someone is in power to decide your future. But this is the way, how business position itself against the failure. In this unfortunate event, some people start to panic, as they anticipate the loss of benefits and potential loss of money. In order to avoid terrible mistakes in a panic mode, it is always good to have a plan. The plan, which include the reasonable steps in case of layoff from the rational rather than emotional side. Based on the recent personal experience with a large scale layoff, in this article I wanted to share some information important to approach this event with the courage, not a fear.

As I already mentioned, layoff may happen at any time while we are employed. By that reason, it is always nice to be prepared. First, make sure HR records with home address are up-to-date: at least one FedEx package will be sent in the event of termination. In fact, it is always recommended signing up for FedEx delivery notifications: in this way, it is possible to learn about the layoff event one day before it actually happens: in most cases, FedEx overnight delivery service will be used. Second, it is a good practice to download each paycheck and store it on your personal computer’s disk: paychecks will not be available anymore in the event of layoff, however total compensation over the last two years is required to calculate the annual income correctly, when filing for unemployment benefits.

There are also a few other steps, which may be useful in some situations before the actual layoff happens. It might be beneficial to obtain employment verification letter in anticipation of certain events such as credit application, etc. Many companies use Theworknumber for verification services: it makes sense to figure out a company’s code, if current employer has records with this provider. As regarding the background check performed by potential employer, most of them are using a third party provider (such as Accuratebackground for example) for a new hire background check. Also it is important to make sure that the contribution maximum for 401K plan is reached early for a calendar year, since there may be no contributions for the rest of the year in the event of employment termination. Finally, it is always recommended verifying what will happen with healthcare spending accounts, and act accordingly to prevent the loss of these savings.

It is also beneficial to get familiar with WARN act, as it may have a direct impact in some situations. The Worker Adjustment and Retraining Notification (WARN) act is a law, which require most employers with 100 or more employees to provide an advance 60 days notice of employment termination. In this case, in the event of termination all affected employees remain on the company’s payroll for 60 days with all benefits included. The rules of WARN act application are complicated. Typically, it may be in effect when more than 500 positions are eliminated in a short time at certain location.

With respect to health insurance, employees affected by layoff has an option to purchase COBRA (Consolidated Omnibus Budget Reconciliation Act), as company’s insurance ends with the termination notice. COBRA has coverage, identical to employer’s insurance. Employer is typically responsible for its part of COBRA for 30 days after termination. Beyond that, former employee is in charge for the entire cost. Therefore, it is recommended to figure out the total cost of health insurance provided by employer and explore other options, if they are available. Affected employees has 60 days period after the termination notice to purchase COBRA. It can be done at any time, since COBRA coverage is retroactive. It means, that all events before the purchase will be covered. In total, COBRA coverage can be extended up to 18 months and may be terminated at any time.

401K plan provided by employer can remain in place, if the total contribution amount exceed $1000. Also there is an option to roll it over to Roth IRA or 401K with another employer, if hired for a new job. It makes sense to leave 401K with former employer, if the plan has better benefits and the choice of options than the one provided by current employer. Roll over into Roth IRA will have a tax implication and need to be approached with caution. Besides that, 401K funds can be distributed into taxable account, but penalty will be assessed in addition to the tax if the owner is younger than 59.5 years old.

At the termination date, most companies provide a severance package. This is a lumped sum, paid to affected employees based on their compensation and a tenure with company. The rules are quite different across the industry. Typical package for example may include 4 weeks pay for the first year of service, and then 1 week for each other year up to 26 weeks. The years of service could be reduced with WARN act, by 60 days when affected employees are still on a payroll. It also should include payment for any unused vacation time. In order to receive the package, affected employee must sign a release agreement mailed using FedEx the day before the termination date. Payoffs are processed when the release agreement received, and paid through the direct deposit or check in mail.

Right after the termination notice, employees affected by layoff may be eligible for unemployment benefits. In some states, there are specific rules which require waiting for certain period before applying for unemployment benefits due to the funds received with severance package. Fortunately, this is not a case in California. The unemployment compensation is paid weekly and currently it is $450 per week. In order to receive the benefit, application is required. During the application, be prepared to provide certain information such as the name, social security number, home address along with the phone number, driver’s license number, list of all previous employers with the dates, wages over the last 18 months, work authorization status and ability to work. Please make sure to mention “layoff” as the reason of not working anymore. In California, please use the link for more detailed information. There are also instructions on youtube, how to file an application for unemployment benefits.

Finally, as few words about stock options. All stock not vested by the termination event will be eliminated immediately. Any vested RSUs (Restricted Stock Unit) are distributed and considered as employee’s personal stock, which can be sold at any time. Typically, there is a few months period after the notice to exercise any vested NQS (Non-qualified Stock). As regarding ESPP (Employee Stock Purchase Plan), the ongoing contribution ends at the termination date and refunded without the interest.

It is important to be aware about all details described above, in order to prevent any loss of benefits offered by the former employer or the state and streamline the process. The next step would be the job hunting, but it deserves a separate article. I wish a good luck to anyone, involved into the unpleasant and stressful experience of being terminated at your job.