Preparing for a lay off - what steps to take now

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Brewman
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Preparing for a lay off - what steps to take now

Post by Brewman » Fri Jan 19, 2018 3:42 pm

I apologize if this has been covered before but I spent a while using the search function without much luck

A group of us have been notified that our jobs will be eliminated later this year (Q3) and we are all receiving some severance that will carry most of through to at least Q1 of next year depending on seniority - so a fairly long glide path. As I am trying to process the information and plan I am trying to come up with a list of what I should be doing now to minimize the pain. Not so much on the job search side but more on the maximizing the benefits available to me now for the next 6 months or so on into the severance period and beyond. Also wanted to share this with my other co workers to try and help everyone out or at least offer alternatives to people - we are actually planning on having some monthly lunch meetings to share info and help each other.

For instance - I thought about upping my HSA contributions so I time hitting the max allowable for the year with my last pay, also considering doing the same with the 401K so I get the max annual amount by the the last pay check...realizing that my severance which will be twice monthly for the period will no longer have those taken out and would cause me some tax issues at year end. Also I think I need to use up any of the contributions to my limited FSA account otherwise I may lose the remaining balance.

What other items or steps do the Bogleheads suggest to start doing now before its too late to help one prepare for a pending job loss. I need some help in processing this - been with Mega Corp for 30+ years......a little scary!

PVW
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Re: Preparing for a lay off - what steps to take now

Post by PVW » Fri Jan 19, 2018 3:52 pm

I believe HSA contribution limits are prorated based on the number of months you are employed (correction - number of months you have a high deductible health plan).

https://www.kiplinger.com/article/busin ... d-off.html

Hug401k
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Re: Preparing for a lay off - what steps to take now

Post by Hug401k » Fri Jan 19, 2018 3:59 pm

You'll likely find a lot of recommendations here, but I would suggest the following (BTW I think most of us working for a megacorp have been laid off at some point. Mine was 2010)

1. Bump up that 401k to max out for the year (unless you are really worried about cash)
2. If health insurance is an issue, get your drs apt done and caught up.
3. Start saving as much cash as possible. Pay off CC debt if possible.
4. Review your bills, especially reoccurring ones, to figure out what you can cut back on. Cut back now.
5. Figure out if there are any services you can get rid of once you are home (lawn service etc)
6. Start reaching out- update the resume, update linked in, etc. Start talking about your future. Be open so people think of you when jobs pop up. Ask people around recommendations.
7. If everyone getting laid off is in the same field/industry, you may want to consider getting ahead of the curve and start looking for a new job asap and not waiting out that severance.
8. File for any of those once a yr corporate benefits- like a rebate for gym membership or commuting.
9. Determine if there is anything from the company you will need to replace, ie. cell phone, life insurance etc.

Best of luck.

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WoodSpinner
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Re: Preparing for a lay off - what steps to take now

Post by WoodSpinner » Fri Jan 19, 2018 4:04 pm

OP,


Financially is your house in order?
  • Emergency Fund
  • Do you have a solid budget? What can yo pare back?
  • Can you put off unnecessary expenses? Defer maintenance?
  • Do you think this is a small blip or a BIG hit?
  • What does a laid off budget look like? Health Care costs?
  • Get a checkup, dental exam. Take care of any health issues while you have insurance
Skill wise?
  • Is your resume up to date?
  • How are your job hunting skills? Interviewing skills
  • Any classes or Certs you can take while still employed?
Just a few thoughts. Hope some of this helps.

WoodSpinner

bklyn96
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Re: Preparing for a lay off - what steps to take now

Post by bklyn96 » Fri Jan 19, 2018 4:19 pm

Consider the possibility that 2018 taxes might be higher than usual if you find a new job this year.

If you get a lump sum severance payment in 2018 and also have income from a new job in 2018 your income could be significantly higher than it's been in recent years.

deltaneutral83
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Re: Preparing for a lay off - what steps to take now

Post by deltaneutral83 » Fri Jan 19, 2018 4:57 pm

PVW wrote:
Fri Jan 19, 2018 3:52 pm
I believe HSA contribution limits are prorated based on the number of months you are employed (correction - number of months you have a high deductible health plan).

https://www.kiplinger.com/article/busin ... d-off.html
I did not know this, this would make it unwise to fill up your HSA at the beginning of the year and then face a layoff later in the year???

Brewman
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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Fri Jan 19, 2018 4:59 pm

Thank you all for answers!

PVW - Great info on the HSA I was not aware of that!

Hug401k and Woodspinner - The financial house is in pretty good order and thank you for your ideas

Bklyn96 - the severance will be paid twice monthly over the severance period, so no lump sum

delamer
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Re: Preparing for a lay off - what steps to take now

Post by delamer » Fri Jan 19, 2018 5:27 pm

Are you in a position to retire or is it critical that you find another job?

anonsdca
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Re: Preparing for a lay off - what steps to take now

Post by anonsdca » Fri Jan 19, 2018 5:40 pm

@ Brewman,

You know, I am likely facing the same thing myself so this thread is of great interest to me. I think WoodSpinner has given the best advice--at least his list is what I am doing.

It's weird. I agree this is scary. It is really crappy to lose a job. I think a lot of trauma is psychological. If you have been with Mega Corp for 30+ years you should be set. Nevertheless, I get that the uncertainty is stressful.

Is your house in order?? WOW--WoodSpinner, what a profound statement. I think we all like to think we have this wired---but do we really? Are we really prepared for the day when our job incomes are cut off? I have been planning for that for several years, but have i accounted for everything?? Not sure.

Wake up call for all us 50+ -----get your financial house in order.

Looking forward to responses

NonnyGoGo
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Re: Preparing for a lay off - what steps to take now

Post by NonnyGoGo » Fri Jan 19, 2018 7:04 pm

This list http://www.hpalumni.org/asap is compiled by former HP employees but it's a great general reminders list for those who work at large companies. Best of luck to you.

OldSport
Posts: 309
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Re: Preparing for a lay off - what steps to take now

Post by OldSport » Fri Jan 19, 2018 7:17 pm

Brewman wrote:
Fri Jan 19, 2018 3:42 pm
I apologize if this has been covered before but I spent a while using the search function without much luck

A group of us have been notified that our jobs will be eliminated later this year (Q3) and we are all receiving some severance that will carry most of through to at least Q1 of next year depending on seniority - so a fairly long glide path. As I am trying to process the information and plan I am trying to come up with a list of what I should be doing now to minimize the pain. Not so much on the job search side but more on the maximizing the benefits available to me now for the next 6 months or so on into the severance period and beyond. Also wanted to share this with my other co workers to try and help everyone out or at least offer alternatives to people - we are actually planning on having some monthly lunch meetings to share info and help each other.

For instance - I thought about upping my HSA contributions so I time hitting the max allowable for the year with my last pay, also considering doing the same with the 401K so I get the max annual amount by the the last pay check...realizing that my severance which will be twice monthly for the period will no longer have those taken out and would cause me some tax issues at year end. Also I think I need to use up any of the contributions to my limited FSA account otherwise I may lose the remaining balance.

What other items or steps do the Bogleheads suggest to start doing now before its too late to help one prepare for a pending job loss. I need some help in processing this - been with Mega Corp for 30+ years......a little scary!
I'm so sorry to hear about your layoff. A close friend of mine was recently laid off.

Since you've been with Mega Corp 30+ years, are you eligible for early retirement? Many mega corps have an 80 point system or something similar. Assuming you started at 22 and worked 30 years, you would be 52+30=82 points and eligible for early retirement at many Mega Corps.

cherijoh
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Re: Preparing for a lay off - what steps to take now

Post by cherijoh » Fri Jan 19, 2018 7:33 pm

Brewman wrote:
Fri Jan 19, 2018 4:59 pm
Thank you all for answers!

PVW - Great info on the HSA I was not aware of that!

Hug401k and Woodspinner - The financial house is in pretty good order and thank you for your ideas

Bklyn96 - the severance will be paid twice monthly over the severance period, so no lump sum
Find out if you will be paid for unused vacation and adjust your use of vacation accordingly. I was in a similar position in 2004 when our work site closed and I opted not to relocate. I had 20+ years of service and got an extra 5 weeks of salary by hoarding my vacation (we got entire allotment in January vs. earning so many hours per pay period). It was paid out with either my first or second severance check.

Do you have a LinkedIn profile? If so, is it complete? Lots of recruiters use LinkedIn to find candidates, so a compelling profile with accomplishments, skills and endorsements, and more formal recommendations will help you stand out from the crowd. Have you tried to build up your connections? LinkedIn has been monetized to a much greater extent than when I was using it for job search, but there is a lot you can still do with the free version in the months leading up to your layoff. At a bare minimum, put an outline of your employment (including dates) and LinkedIn will suggest people you may know. If you are showing that your career overlapped at the same time at the same company you can send them an invitation without having a current email for them. The same deal for fellow students from your college/university days. Once you connect with a few people, you can search for 2nd degree connections to connect with even more people. Also join some groups - either alumni or professional groups can help further increase your connections.

Start doing research NOW to find target companies for which you would be interested in working. Tell everyone you know that you'll be losing your job and ask if anyone knows someone who works at one of your target companies. Once you have some contacts, set up an informational interview with each to find out more about the company and what roles would interest you. Stay in touch with any promising contacts - if a job opens up you may be able get a direct line to the hiring manager or an internal recruiter rather than having to submit your resume via the company's website (which is often a black hole).

Find out if your employer will provide you with any outplacement counseling - if they do, take advantage of it. Resume reviews and mock interviews can be very valuable.

Brewman
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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Fri Jan 19, 2018 7:43 pm

delamer wrote:
Fri Jan 19, 2018 5:27 pm
by delamer » Fri Jan 19, 2018 6:27 pm

Are you in a position to retire or is it critical that you find another job?
Delamer - I am with in about 3 years of my "planned" retire date...about 2 years now given the glide path they offered. Not Critical to find a job that would completely replace what I lost. I do plan to begin a selective search in the next couple months but not panicked yet! I will be 58 when the severance runs out. Once that happens I think I could apply for unemployment which would buy additional time. A small pension is available through the PBGC (currently about $1300/mth) but I want to delay that as long as possible ...hopefully until 65 same with SS. Wife is employed but only makes about 35k. Struggling with maybe just doing something different or even part time or maybe contract work. After being in corporate finance staff my entire 30+ years I'm a little fried. While I have the credentials- MBA & CMA not sure I want to or could take starting all over again at 58. Also not sure how much of a millstone my age will be with getting a "good" finance job. Always been an analyst not a supervisor or manager and do not wish to supervise. I do not have any expectation of getting the Salary I have now - I have done fairly well. Wife and I have been savers thanks in part to this site and the boglehead philosophy. We are members of the two comma club although she and I are the only two that know that. My youngest is in her third year of college and I believe we have the remainder covered in a 529. Only real debt is the mortgage and that only about 80k 30yr at 3.85%. We never tried to keep up with anyone named Jones! So sitting here typing this makes me believe I am in a way better place than most .
But it is really unnerving and scary when you lose a good steady job that you have worked most of your adult life. The most distasteful thing is that I was at this company probably 20 years when they went into bankruptcy and emerged (lot of people where let go) came out stronger than ever and we just had about out third year of record setting sales and profits......but apparently not enough..go figure?

Nonny GoGO - Awesome list I will be trying to digest it all in the next few days.

Thank you all for listening and replying

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jr6857
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Re: Preparing for a lay off - what steps to take now

Post by jr6857 » Fri Jan 19, 2018 7:50 pm

One item that I see missing from the thread is how you manage the Flexible Spending Account (FSA), assuming you have one.

Contributions will cease to the FSA upon layoff. So you will not contribute the full amount that you originally requested during benefits enrollment. However, you can actually spend the entire year's annual contribution ($2,400 is the max) as long as the spending is completed prior to layoff. It is the company's responsibility to fund any of the shortfall in contributions at time of layoff. On the flip side, you will forfeit any unspent FSA money at the time of layoff.

As an example, at time of benefit enrollment you elected to contribute the maximum FSA amount of $2,400. The layoff occurs at June 30 so only $1,200 has been taken out of your paycheck. You may spend the full $2,400 in eligible expenses prior to layoff and the company will be responsible for making up the difference between your contribution and the amount spent. However, if you only spent $600 prior to layoff, you will forfeit the additional $600 in contributions.

So bottom line is to get all of your FSA eligible medical costs front end loaded.[/i][/i]

OldSport
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Re: Preparing for a lay off - what steps to take now

Post by OldSport » Fri Jan 19, 2018 7:56 pm

Brewman wrote:
Fri Jan 19, 2018 7:43 pm
delamer wrote:
Fri Jan 19, 2018 5:27 pm
by delamer » Fri Jan 19, 2018 6:27 pm

Are you in a position to retire or is it critical that you find another job?
Delamer - I am with in about 3 years of my "planned" retire date...about 2 years now given the glide path they offered. Not Critical to find a job that would completely replace what I lost. I do plan to begin a selective search in the next couple months but not panicked yet! I will be 58 when the severance runs out. Once that happens I think I could apply for unemployment which would buy additional time. A small pension is available through the PBGC (currently about $1300/mth) but I want to delay that as long as possible ...hopefully until 65 same with SS. Wife is employed but only makes about 35k. Struggling with maybe just doing something different or even part time or maybe contract work. After being in corporate finance staff my entire 30+ years I'm a little fried. While I have the credentials- MBA & CMA not sure I want to or could take starting all over again at 58. Also not sure how much of a millstone my age will be with getting a "good" finance job. Always been an analyst not a supervisor or manager and do not wish to supervise. I do not have any expectation of getting the Salary I have now - I have done fairly well. Wife and I have been savers thanks in part to this site and the boglehead philosophy. We are members of the two comma club although she and I are the only two that know that. My youngest is in her third year of college and I believe we have the remainder covered in a 529. Only real debt is the mortgage and that only about 80k 30yr at 3.85%. We never tried to keep up with anyone named Jones! So sitting here typing this makes me believe I am in a way better place than most .
But it is really unnerving and scary when you lose a good steady job that you have worked most of your adult life. The most distasteful thing is that I was at this company probably 20 years when they went into bankruptcy and emerged (lot of people where let go) came out stronger than ever and we just had about out third year of record setting sales and profits......but apparently not enough..go figure?

Nonny GoGO - Awesome list I will be trying to digest it all in the next few days.

Thank you all for listening and replying
Since you've been with Mega Corp 30+ years, are you eligible for official early retirement vs a layoff? Many mega corps have an 80 point system or something similar. Assuming you started at 22 and worked 30 years, you would be 52+30=82 points and eligible for early retirement at many Mega Corps.

Lynette
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Re: Preparing for a lay off - what steps to take now

Post by Lynette » Fri Jan 19, 2018 8:03 pm

Networking is the best way to get a new job and you have been given good advice on this above. But for most of us who have lost our jobs, the psychological aspect is great. As one outplacement company with whom I worked explained, it as if one lost a loved one and the same stages of grief - denial, anger, etc. I think the plan for your group to meet regularly to give one another support is excellent. Another great stress reliever is exercise.

Best wishes.

Lynette

delamer
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Re: Preparing for a lay off - what steps to take now

Post by delamer » Fri Jan 19, 2018 8:05 pm

Brewman wrote:
Fri Jan 19, 2018 7:43 pm
delamer wrote:
Fri Jan 19, 2018 5:27 pm
by delamer » Fri Jan 19, 2018 6:27 pm

Are you in a position to retire or is it critical that you find another job?
Delamer - I am with in about 3 years of my "planned" retire date...about 2 years now given the glide path they offered. Not Critical to find a job that would completely replace what I lost. I do plan to begin a selective search in the next couple months but not panicked yet! I will be 58 when the severance runs out. Once that happens I think I could apply for unemployment which would buy additional time. A small pension is available through the PBGC (currently about $1300/mth) but I want to delay that as long as possible ...hopefully until 65 same with SS. Wife is employed but only makes about 35k. Struggling with maybe just doing something different or even part time or maybe contract work. After being in corporate finance staff my entire 30+ years I'm a little fried. While I have the credentials- MBA & CMA not sure I want to or could take starting all over again at 58. Also not sure how much of a millstone my age will be with getting a "good" finance job. Always been an analyst not a supervisor or manager and do not wish to supervise. I do not have any expectation of getting the Salary I have now - I have done fairly well. Wife and I have been savers thanks in part to this site and the boglehead philosophy. We are members of the two comma club although she and I are the only two that know that. My youngest is in her third year of college and I believe we have the remainder covered in a 529. Only real debt is the mortgage and that only about 80k 30yr at 3.85%. We never tried to keep up with anyone named Jones! So sitting here typing this makes me believe I am in a way better place than most .
But it is really unnerving and scary when you lose a good steady job that you have worked most of your adult life. The most distasteful thing is that I was at this company probably 20 years when they went into bankruptcy and emerged (lot of people where let go) came out stronger than ever and we just had about out third year of record setting sales and profits......but apparently not enough..go figure?

Nonny GoGO - Awesome list I will be trying to digest it all in the next few days.

Thank you all for listening and replying
I am sorry for your situation. My father went through something similar — yet so different — at the same age, because he was offered early retirement with health insurance, pension, and a bridge payment equivalent to Social Security until age 62.

I asked my question because it seems to me that the advice would be somewhat different if you really were prepared (financially and/or psychologically) to retire versus if you really wanted (or needed) to keep working.

Will it be possible to get health insurance through your wife’s job? Affordable health insurance until you and your wife are Medicare-eligible would be my biggest concern, given that it sounds like the rest of your finances are in good shape.

And it never hurts to conserve cash during periods of uncertainty.

Best of luck.

Brewman
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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Sat Jan 20, 2018 10:02 am

Again thank you all for the good ideas I plan to share these with my co-workers and make my own personal list.
jr6857 wrote:
Fri Jan 19, 2018 7:50 pm
y jr6857 » Fri Jan 19, 2018 8:50 pm

One item that I see missing from the thread is how you manage the Flexible Spending Account (FSA), assuming you have one.

Contributions will cease to the FSA upon layoff. So you will not contribute the full amount that you originally requested during benefits enrollment. However, you can actually spend the entire year's annual contribution ($2,400 is the max) as long as the spending is completed prior to layoff. It is the company's responsibility to fund any of the shortfall in contributions at time of layoff. On the flip side, you will forfeit any unspent FSA money at the time of layoff.

As an example, at time of benefit enrollment you elected to contribute the maximum FSA amount of $2,400. The layoff occurs at June 30 so only $1,200 has been taken out of your paycheck. You may spend the full $2,400 in eligible expenses prior to layoff and the company will be responsible for making up the difference between your contribution and the amount spent. However, if you only spent $600 prior to layoff, you will forfeit the additional $600 in contributions.

So bottom line is to get all of your FSA eligible medical costs front end loaded

I was not aware of this and yes I have an FSA that was to have $1200 for the year. Surprised that we would not have to pay back anything taken out beyond our contributions? Me my wife and daughter will be sure to be ordering a year supply of contacts well before the 6/30 date :D My plan will be to pull ahead any dental and vision expenses (its a limited FSA since I have an HSA) we would normally have before the due date which should get us close to the full $1200 ....if they do claw it back thats fine since they will be costs we would have spent in the future any way.
Lynette wrote:
Fri Jan 19, 2018 8:03 pm
Networking is the best way to get a new job and you have been given good advice on this above. But for most of us who have lost our jobs, the psychological aspect is great. As one outplacement company with whom I worked explained, it as if one lost a loved one and the same stages of grief - denial, anger, etc. I think the plan for your group to meet regularly to give one another support is excellent. Another great stress reliever is exercise.
Lynette thank you for this - The day they told us I ended up going to Y to workout and it did help....I won't lie but I also had a couple ounces of wild turkey later that night!
delamer wrote:
Fri Jan 19, 2018 8:05 pm
I am sorry for your situation. My father went through something similar — yet so different — at the same age, because he was offered early retirement with health insurance, pension, and a bridge payment equivalent to Social Security until age 62.

I asked my question because it seems to me that the advice would be somewhat different if you really were prepared (financially and/or psychologically) to retire versus if you really wanted (or needed) to keep working.

Will it be possible to get health insurance through your wife’s job? Affordable health insurance until you and your wife are Medicare-eligible would be my biggest concern, given that it sounds like the rest of your finances are in good shape.

And it never hurts to conserve cash during periods of uncertainty.
Delamer - thanks again. As I mentioned earlier I do have access to a pension (small) at the PBGC but really want to delay taking that since the monthly amount grows actuarially the longer I wait I believe up until I'm 65 but the one kicker is current retires from my company are eligible for some type of tax credit for healthcare costs (HCTC) which I'll need to explore ---- it may increase the likelihood of taking the pension sooner since I think I need to be drawing that to get the HCTC...not sure. In the mean time the company in addition to the severance is also giving an additional amount month for the severance period to cover getting healthcare ...I believe 1200 / month

Carson
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Re: Preparing for a lay off - what steps to take now

Post by Carson » Sat Jan 20, 2018 10:13 am

NonnyGoGo wrote:
Fri Jan 19, 2018 7:04 pm
This list http://www.hpalumni.org/asap is compiled by former HP employees but it's a great general reminders list for those who work at large companies. Best of luck to you.
Thank you, that was very helpful. I am in a megacorp where things are feeling tense. I feel much more proactive after reading that.
30-something personal finance enthusiast, just get getting started on this whole portfolio thing.

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whodidntante
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Re: Preparing for a lay off - what steps to take now

Post by whodidntante » Sat Jan 20, 2018 10:22 am

Hard to say as I don't know much about your situation. Since you've been working so long I assume you have adequate liquidity. Medical insurance is a key consideration and you might get sticker shock. Will your severance cover it for a period?

MrBeaver
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Re: Preparing for a lay off - what steps to take now

Post by MrBeaver » Sat Jan 20, 2018 11:46 am

FYI, on HSA contributions there was an alternate method of determining eligibility deemed the ‘last month rule’ added after the incarnation of HSAs in addition to the original prorated formula used with the old MSAs and HSAs early on.

Using this rule, you may contribute the full amount for a given tax year if you have HDHP coverage on Dec. 1 of that year. However, there is a further ‘testing period’ that then applies that requires you to maintain that HDHP coverage through the end of the following December.

Functionally, this means that you may still contribute the max to an HSA for 2018 as long as you are covered by Dec. 1 by a new employer or ACA marketplace HDHP. If you later have a lapse in coverage prior to the end of 2019, you will owe income tax on the contributions you made for the 2018 tax year above those allowed by the prorated formula.

Also, you can make 2018 HSA contributions up until the filing deadline (Apr. 15 2019). So the safe bet is likely to contribute Now as if you would use the pro-rated formula but hold cash to top it off by the time you file 2019 taxes in the event that you gain HDHP coverage again by Dec. 1 2018 and plan to not have a lapse in HDHP coverage by the end of Dec. 2019.

This may take some additional math to plan monthly contributions knowing your month of termination if your employer provides a lump sum HSA deposit at the beginning of the year. Also keep in mind that if they provide COBRA either by paying for it during severance or by you buying it, that would still count as HDHP coverage for those months you are covered after termination.

Finally, if you are very confident that you will have coverage on Dec. 1, it may make sense to accelerate contributions now (more cash flow, less tax, less future social security), as contributions now from payroll deduction will be pre-payroll tax, whereas manual contributions from after tax dollars are after payroll taxes.

Best of luck to you. I haven’t gone through this yet, but I’m counting my blessings and wondering if the next business cycle downturn will be my turn.

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Top99%
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Re: Preparing for a lay off - what steps to take now

Post by Top99% » Sat Jan 20, 2018 6:19 pm

I am very sorry to hear about your impending layoff. My hat is off to you for building up a nice nest eggs since that gives you some options and hopefully helps you sleep at night. If you haven't already done so you might want to make sure your asset allocation (Stocks Vs Bonds) is in your comfort zone in case your need to tap your nest egg coincides with a market crash. Hopefully your nice nest egg will also boost your confidence when you start interviewing. Speaking of that the site retirementjobs.com might be worth spending some time on.

For health care, some megacorps will allow "retired" employees to stay in the corporate plan if years plus age of service = a number that is typically 60 or so. It might be worth asking HR if your company has a "retiree medical access plan" since these aren't widely advertised.

Best wishes for what comes next and keep us updated!
Adapt or perish

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Re: Preparing for a lay off - what steps to take now

Post by itstoomuch » Sat Jan 20, 2018 6:24 pm

Do NOT exceed the 401k/IRA/Roth limit for tax year of layoff. The severance pay may put you over the limits and you won't know about it until the auditors tell you 3 years later.
YMMV
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Brewman
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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Sun Jan 21, 2018 11:58 am

7trumpets wrote:
Sat Jan 20, 2018 11:46 am
. Also keep in mind that if they provide COBRA either by paying for it during severance or by you buying it, that would still count as HDHP coverage for those months you are covered after termination.

Finally, if you are very confident that you will have coverage on Dec. 1, it may make sense to accelerate contributions now (more cash flow, less tax, less future social security), as contributions now from payroll deduction will be pre-payroll tax, whereas manual contributions from after tax dollars are after payroll taxes.
7Trumpets - thank you for this. I am strongly considering going the COBRA. After checking what it would cost through my Wife's employer ( they contribute only for the employee) it may be cheaper to go COBRA. My employer will give me an additional $1800 /mth ( I thought it was much less) for healthcare for 10 months or until I am eligible to receive it from my spouses plan or another employer. Since her employer does not offer it to families I think I am ok. My initial thought is to elect cobra for my self and daughter...the 1800 a month they provide I think is almost double the cost (i am seeing about $1000 mth) and put the remainder in the HSA and use that money to continue COBRA until it expires...which I think is 18 months. If that is my plan then I think I should accelerate the HSA now to avoid the payroll taxes. Still a bit in the denial stage and trying to take the time to think it through!
Top99% wrote:
Sat Jan 20, 2018 6:19 pm
If you haven't already done so you might want to make sure your asset allocation (Stocks Vs Bonds) is in your comfort zone in case your need to tap your nest egg coincides with a market crash
Top 99% - yes AA is on the list I am already pretty conservative at about 55/45. Also if I understand correctly I can tap the 401k prior to 59.5 if I have left the employer? I will be 57 shortly.
itstoomuch wrote:
Sat Jan 20, 2018 6:24 pm
Do NOT exceed the 401k/IRA/Roth limit for tax year of layoff. The severance pay may put you over the limits and you won't know about it until the auditors tell you 3 years later.
YMMV
Itstoomuch - Could explain this some more? I was planning to try to get my contribution to 18k before I leave ....I don't think we could swing the catchup amount before the termination date

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rob
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Re: Preparing for a lay off - what steps to take now

Post by rob » Sun Jan 21, 2018 12:13 pm

First off... breath... it's a shock even when you know it's coming.

I think you've got some great advice but one I didn't see; Do some crystal ball tax planning... Think about if you want the severance paid this year or next... You will have some amount of time to sign the paperwork after your last day (more since your older) to accept the severance and depending on timing you may be able to delay enough to get the severance payout next year.
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delamer
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Re: Preparing for a lay off - what steps to take now

Post by delamer » Sun Jan 21, 2018 12:25 pm

Brewman wrote:
Sun Jan 21, 2018 11:58 am
7trumpets wrote:
Sat Jan 20, 2018 11:46 am
. Also keep in mind that if they provide COBRA either by paying for it during severance or by you buying it, that would still count as HDHP coverage for those months you are covered after termination.

Finally, if you are very confident that you will have coverage on Dec. 1, it may make sense to accelerate contributions now (more cash flow, less tax, less future social security), as contributions now from payroll deduction will be pre-payroll tax, whereas manual contributions from after tax dollars are after payroll taxes.
7Trumpets - thank you for this. I am strongly considering going the COBRA. After checking what it would cost through my Wife's employer ( they contribute only for the employee) it may be cheaper to go COBRA. My employer will give me an additional $1800 /mth ( I thought it was much less) for healthcare for 10 months or until I am eligible to receive it from my spouses plan or another employer. Since her employer does not offer it to families I think I am ok. My initial thought is to elect cobra for my self and daughter...the 1800 a month they provide I think is almost double the cost (i am seeing about $1000 mth) and put the remainder in the HSA and use that money to continue COBRA until it expires...which I think is 18 months. If that is my plan then I think I should accelerate the HSA now to avoid the payroll taxes. Still a bit in the denial stage and trying to take the time to think it through!
Top99% wrote:
Sat Jan 20, 2018 6:19 pm
If you haven't already done so you might want to make sure your asset allocation (Stocks Vs Bonds) is in your comfort zone in case your need to tap your nest egg coincides with a market crash
Top 99% - yes AA is on the list I am already pretty conservative at about 55/45. Also if I understand correctly I can tap the 401k prior to 59.5 if I have left the employer? I will be 57 shortly.
itstoomuch wrote:
Sat Jan 20, 2018 6:24 pm
Do NOT exceed the 401k/IRA/Roth limit for tax year of layoff. The severance pay may put you over the limits and you won't know about it until the auditors tell you 3 years later.
YMMV
Itstoomuch - Could explain this some more? I was planning to try to get my contribution to 18k before I leave ....I don't think we could swing the catchup amount before the termination date
There is a difference between a spouse’s employer not offering health insurance for family members versus a spouse’s employer not contributing toward the cost of family members’ coverage (but making it available with the employee paying the full premium)

You should be really clear on your options and the requirements under your severance.

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Makaveli
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Re: Preparing for a lay off - what steps to take now

Post by Makaveli » Sun Jan 21, 2018 12:28 pm

deltaneutral83 wrote:
Fri Jan 19, 2018 4:57 pm
PVW wrote:
Fri Jan 19, 2018 3:52 pm
I believe HSA contribution limits are prorated based on the number of months you are employed (correction - number of months you have a high deductible health plan).

https://www.kiplinger.com/article/busin ... d-off.html
I did not know this, this would make it unwise to fill up your HSA at the beginning of the year and then face a layoff later in the year???
I am not sure this is correct. My employer contributes $2,500 so I cover the other $950 to max out for single status. After discussing w/ plan administrator I lumped $950 on 1st 2018 paycheck and have since invested it... capturing the nice start to the year.

***Disregard - realized this was in regards to contributions limits.

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randomizer
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Re: Preparing for a lay off - what steps to take now

Post by randomizer » Sun Jan 21, 2018 12:33 pm

I don't anticipate getting laid off but this thread is a great reminder of the prudence of preparing for the worst.
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Re: Preparing for a lay off - what steps to take now

Post by itstoomuch » Sun Jan 21, 2018 12:34 pm

^ any severance will be allocated according to a regular paycheck. Thus you could easily go over the allowable 401k contribution percentage. I forgot the terms, if severance counts as work income or non-work income.
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Re: Preparing for a lay off - what steps to take now

Post by Dottie57 » Sun Jan 21, 2018 12:37 pm

itstoomuch wrote:
Sun Jan 21, 2018 12:34 pm
^ any severance will be allocated according to a regular paycheck. Thus you could easily go over the allowable 401k contribution percentage. I forgot the terms, if severance counts as work income or non-work income.


I was told by my HR that severance is not given for worked performed and therefore is not eligible for 401k. Also severance is paid after employment has ended. If not an employee you can't contribute.

TravelforFun
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Re: Preparing for a lay off - what steps to take now

Post by TravelforFun » Sun Jan 21, 2018 12:51 pm

OP, I don't have any additional advice to give you but I have to say your company is pretty caring because they gave you a six-month heads up. What happens when employees get that kind of notice is that they tend to accelerate all kinds of medical procedures and that could break a small-size company. I've seen it happened before.

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Re: Preparing for a lay off - what steps to take now

Post by whodidntante » Sun Jan 21, 2018 12:55 pm

Dottie57 wrote:
Sun Jan 21, 2018 12:37 pm

I was told by my HR that severance is not given for worked performed and therefore is not eligible for 401k. Also severance is paid after employment has ended. If not an employee you can't contribute.
That is my understanding also.

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Re: Preparing for a lay off - what steps to take now

Post by itstoomuch » Sun Jan 21, 2018 12:56 pm

Good.
In my time, it was not so, or the ADP people did not apply the proper rule.
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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Sun Jan 21, 2018 2:00 pm

rob wrote:
Sun Jan 21, 2018 12:13 pm
First off... breath... it's a shock even when you know it's coming.

I think you've got some great advice but one I didn't see; Do some crystal ball tax planning... Think about if you want the severance paid this year or next... You will have some amount of time to sign the paperwork after your last day (more since your older) to accept the severance and depending on timing you may be able to delay enough to get the severance payout next year.
rob - Thanks Yes breathe, I know! :shock: I think no matter how well prepared you are it still catches you a bit off guard! regarding the severance we don't have a choice it is paid out twice monthly for the 10 months just as a paycheck would be....but I am trying to cognizant of the what 2018 tax picture will be
delamer wrote:
Sun Jan 21, 2018 12:25 pm
There is a difference between a spouse’s employer not offering health insurance for family members versus a spouse’s employer not contributing toward the cost of family members’ coverage (but making it available with the employee paying the full premium)

You should be really clear on your options and the requirements under your severance.
delamer - good point I will followup - I think their intent and I will verify is to stop the supplement if you are subsidized. They say in the paperwork that the subsidy can be used for COBRA or to purchase independent coverage but will stop if you are eligible for coverage under a new job or your spouses plan....my wife's handbook says family members are not eligible. But she says that they have allowed some people to piggyback on to their group rate, which in my mind would be no different than me getting a group rate from an organization like AAA or AARP. But your point is well taken I will check
itstoomuch wrote:
Sun Jan 21, 2018 12:34 pm
any severance will be allocated according to a regular paycheck. Thus you could easily go over the allowable 401k contribution percentage. I forgot the terms, if severance counts as wor
itstoomuch - where can I find the max %?
TravelforFun wrote:
Sun Jan 21, 2018 12:51 pm
OP, I don't have any additional advice to give you but I have to say your company is pretty caring because they gave you a six-month heads up. What happens when employees get that kind of notice is that they tend to accelerate all kinds of medical procedures and that could break a small-size company. I've seen it happened before.
Travelforfun - You are 100% correct! Once I had a little time to digest I realized getting over 5 months notice and then getting 10 months severance I am extremely fortunate. Other folks were given 2 months notice and as recent as last year some were told to finish the week. Our group will take a while to transition thus we got a longer heads up

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samsoes
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Re: Preparing for a lay off - what steps to take now

Post by samsoes » Sun Jan 21, 2018 3:14 pm

Brewman wrote:
Sat Jan 20, 2018 10:02 am

I was not aware of this and yes I have an FSA that was to have $1200 for the year. Surprised that we would not have to pay back anything taken out beyond our contributions? Me my wife and daughter will be sure to be ordering a year supply of contacts well before the 6/30 date :D My plan will be to pull ahead any dental and vision expenses (its a limited FSA since I have an HSA) we would normally have before the due date which should get us close to the full $1200 ....if they do claw it back thats fine since they will be costs we would have spent in the future any way.
Overspent FSA accounts can't be clawed-back. Think of them like a dental or vision insurance policy with maximum benefit amounts; they're structured sort of similarly. With this type of insurance policy, you're paying $x per month for defined benefits over a year. Same thing with an FSA. A $1200 (annual) FSA allows you to have uncovered medical expenses reimbursed up to the "policy" amount, in this case $1200. You pay $100/month with pre-tax dollars for this type of policy; you have access to the entire policy benefit ($1200) from day 1.

This isn't the case, however, for dependent care FSAs (child care, elder care, etc.). Those reimburse as you go, there isn't an upfront benefit to them.

Edit: for insurance professionals out there, I know it isn't a legal policy per se, with underwriters, etc. But they work similarly with regard to legitimately receiving the entire benefit early in the plan time-frame.

Edit 2: Regarding underspent FSA accounts, you can keep them alive for the full annual amount by continuing them through COBRA. If you're getting laid-off on June 30, and you're expecting a large dental expense on July 10, pay for one month FSA COBRA continuation (the same as you'd pay through payroll deductions but with after-tax dollars in this case) and get the big July dental expense reimbursed, and then cancel the FSA part of COBRA. (I'm not sure if you can cancel just the FSA part of COBRA if you're also paying for Health Insurance through COBRA, however.)

Employers are only required to offer FSA COBRA coverage on underspent (spent less than deducted through payroll) FSA accounts. If you've overspent your FSA by your termination date, congratulations(!), but they won't offer to continue it through COBRA.
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lynneny
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Re: Preparing for a lay off - what steps to take now

Post by lynneny » Sun Jan 21, 2018 11:36 pm

I sadly know all about severance now. At 61, I was laid off in mid-December after 30 years at megacorp.

In case this helps OP: Our severance (capped at 20 weeks, unfortunately for me) is paid twice monthly, as my salary used to be. Social security/medicare and income taxes are deducted, just like with previous paychecks. But I can no longer contribute to 401(k) or HSA through payroll deduction. I just signed up for COBRA, so I'll be able to continue contributing to HSA for the 18-month duration of COBRA.

After severance payments end, I'll be eligible for unemployment (that's how it works in NY; apparently some states let you collect unemployment while you're still getting severance). I'll register at our state's unemployment site soon though, so I can file as soon as severance ends and I become eligible.

I fully used my limited FSA for 2017. Because I was laid off in mid-December before the final bimonthly paycheck deduction (which would have been all of about $10 because I only put $250/year in the limited FSA), my FSA was classified as "overspent," and the COBRA paperwork informed me that because it was overspent, I wasn't eligible for a limited FSA on COBRA. Apparently if I hadn't spent it all, or had come out even, I would have been eligible.

As others have said, it's great that you have so much advance notice of layoff, and are using the time to plan wisely. My former company's layoffs go like this: "We're laying you off. This is your last day. HR will go over the severance agreement with you. And then you'll leave." So it was pretty overwhelming.

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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Mon Jan 22, 2018 7:15 am

samsoes wrote:
Sun Jan 21, 2018 3:14 pm
Overspent FSA accounts can't be clawed-back. Think of them like a dental or vision insurance policy with maximum benefit amounts; they're structured sort of similarly. With this type of insurance policy, you're paying $x per month for defined benefits over a year. Same thing with an FSA. A $1200 (annual) FSA allows you to have uncovered medical expenses reimbursed up to the "policy" amount, in this case $1200. You pay $100/month with pre-tax dollars for this type of policy; you have access to the entire policy benefit ($1200) from day 1.
]
Employers are only required to offer FSA COBRA coverage on underspent (spent less than deducted through payroll) FSA accounts. If you've overspent your FSA by your termination date, congratulations(!), but they won't offer to continue it through COBRA.
Samsoes - Thank you for this! This group offers so much good information about such a wide array of topics my only regret is not finding it years earlier
lynneny wrote:
Sun Jan 21, 2018 11:36 pm
I sadly know all about severance now. At 61, I was laid off in mid-December after 30 years at megacorp...........
As others have said, it's great that you have so much advance notice of layoff, and are using the time to plan wisely. My former company's layoffs go like this: "We're laying you off. This is your last day. HR will go over the severance agreement with you. And then you'll leave." So it was pretty overwhelming.
lynneny - I am So sorry. I don't know if I could fathom what a shock that would be to be let go like that. And yes after I have had a couple days to process it I realize how much worse my situation could have been. I wish you the best and hope this thread helps you as much as it has helped me. I started this thread with the hope of getting some information that might help me avoid mistakes or missing something....now after hearing your situation I hope others, especially those in our 50's and beyond use it as a wake up to be sure they have their house in order....somehow I don't think any one is truly "ready" for a sudden job loss.

Brewman
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Re: Preparing for a lay off - what steps to take now

Post by Brewman » Wed Jan 24, 2018 12:23 pm

Brewman wrote:
Mon Jan 22, 2018 7:15 am
samsoes wrote: ↑Sun Jan 21, 2018 4:14 pm
Overspent FSA accounts can't be clawed-back. Think of them like a dental or vision insurance policy with maximum benefit amounts; they're structured sort of similarly. With this type of insurance policy, you're paying $x per month for defined benefits over a year. Same thing with an FSA. A $1200 (annual) FSA allows you to have uncovered medical expenses reimbursed up to the "policy" amount, in this case $1200. You pay $100/month with pre-tax dollars for this type of policy; you have access to the entire policy benefit ($1200) from day 1.
]
Employers are only required to offer FSA COBRA coverage on underspent (spent less than deducted through payroll) FSA accounts. If you've overspent your FSA by your termination date, congratulations(!), but they won't offer to continue it through COBRA.
Would any of the FSA experts here know if you do use up the annual amount in your FSA and are terminated prior to funding it fully is the amount beyond what you contributed considered as income for tax purposes?

Again thank you all for offering your suggestions to this thread - our group that got axed will be having our first lunch get together soon discuss items and help guide each other

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