How to Handle a Job Loss

According to a survey by the National Association for Business Economics, 44% of firms cut payrolls in the fourth quarter of 2008 and 39% of companies plan to reduce payrolls in the next six months. No one enjoys thinking about the possibility of losing their job, but unfortunately it’s a necessity in our current economic atmosphere. It’s always better to have a job loss plan just in case instead of being blind-sided by a lay-off and not knowing which way to turn. If you do lose your job, here are a few helpful facts and tips to help you get through the tough times: Severance pay Fortunately, many companies offer a severance package to any workers they lay-off. Severance pay is typically based on your current annual salary and the number of years you’ve worked for the company. For example, some corporations may offer two weeks of salary for each year you’ve worked there. Therefore, if you worked at the company for 10 years, you would receive 20 weeks of pay after you’re laid off. While some companies pay this severance package over time, others offer a lump sum. If you have the opportunity to choose between the two, you should consider the tax implications of each option. If your company is a sinking ship and you worry they may not survive much longer, you should definitely opt for the lump sum. On the other hand, if the company seems relatively stable, you may be better off having the severance paid over time. Talk to your financial advisor about which choice is best for you. Before you sign the dotted line on your severance package contract, make sure you understand all the terms. Some companies require that you sign forms agreeing not to make any legal claims against the company. They may also ask you to sign a non-compete form or an agreement restricting your right to talk about the company. Make sure you read all the fine print and understand what you’re signing before you accept the severance pay. Retirement plans If you have a 401(k) plan or another employer sponsored individual retirement plan, you should talk to your financial advisor. He or she can help you rollover your retirement plan into another account, such as a traditional IRA. You could also take an early distribution from the account, but income taxes and possibly a penalty would be owed. Therefore, most financial experts do not recommend this option. Before you make any major moves, discuss it with your financial advisor. If you have a traditional pension plan through your company, your retirement benefits are based on your age, your years with the company and your salary. Typically, you are required to work to your company’s specified retirement age to receive maximum pension benefits. Therefore, if you get laid off, you’ll probably receive lesser benefits. Ask your Human Resources department for a copy of the pension plan summary. This should give you information about the type of plan you have and how benefits will be paid to you if the plan is terminated. If your plan is covered by ERISA and you have questions or concerns, you should contact the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA). This agency can give you additional information about the security of your benefits. Call 866-444-3272 or visit <a href="http://www.askebsa.dol.gov/">www.askebsa.dol.gov</a>. If your pension plan is terminated and your company does not have enough money to pay your benefits, you are protected by the Pension Benefit Guarantee Corporation (PBGC). The PBGC, which insures pension plans, will pay your benefits up to a guaranteed amount. You can contact the PBGC at 800-400-7242 or visit <a href="http://www.pbgc.gov/workers-retirees/index.html">www.pbgc.gov/workers-retirees/index.html.</a> Health Care If you are laid off, your company-paid health insurance will probably be terminated as well. Luckily, the federal government offers support to many people who suddenly lose health insurance through the Consolidated Omnibus Budget Reconciliation Act, also known as COBRA. Under this law, employees who meet certain requirements are eligible for temporary continuation of their health benefits after losing their job. If you are eligible for COBRA and lose your job either voluntarily or involuntarily, you will receive 18 months of extended coverage for yourself and your dependents. (However, if you lose a job due to gross misconduct, you will not receive benefits.) Of course, there’s a catch: COBRA coverage can be pricey. You are required to pay 100 percent of your health insurance premiums in addition to an administrative fee of up to 2 percent. This can get extremely expensive for someone who is currently unemployed. Therefore, you may want to consider buying a private policy or signing up for dependent coverage through your spouses’ employer-sponsored plan. Scoring a new job Obviously, the most difficult part about losing your job is finding a new one. If you work in the corporate world and get laid off, your company may offer career placement services. No matter how angry you may be with your firm, you should never turn down such a golden opportunity. As part of this kind of beneficial program, you may get help updating your resume and receive career counseling and interview technique training. Alternatively, your company may offer tuition assistance so you can receive training in another industry. Be sure to ask your human resources rep about these potential opportunities. You should also take advantage of networking groups and other professional organizations. These networks can connect you to countless professionals, many of whom may have some valuable job leads. 2009-03-04T04:58:48Z

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how-to-handle-a-job-loss

2009-03-07T19:38:00Z

In the midst of a turbulent economy, job losses and lay-offs are growing exponentially throughout the U.S.

How to Handle a Job Loss

2009-03-07T19:38:00Z