What To Do If You Are Fired Or Laid Off
As a general matter, you can't be fired just because of your health condition. However, you can be fired for any other legitimate reason.
If you are terminated, immediately take stock of your benefits and take the appropriate steps to maximize what you can.
It likely sounds strange, but even if you are fired, you can negotiate for what you want. In addition to whatever else may be on your list, protecting your benefits such as health insurance and life insurance should be at the top. The importance to you of health insurance is obvious. In addition to providing for your heirs, life insurance can provide a source of cash while you are still alive. To learn about getting cash from a life insurance policy, click here.
NOTE: If you think you may be fired, and if you have not disclosed your health condition at work, keep a letter handy in which you disclose your health condition. Giving the letter to your boss may keep you from being fired or laid off -- or at least postpone the event.
BENEFITS TO REVIEW
Health Insurance: Unless you're independently wealthy, health insurance in the United State is essential to good health care.
- If you have a spouse or significant other, find out if you can be covered under his or her health insurance plan.
- If not, the laws generally known as COBRA allow you to continue the health insurance provided by your employer for an extended period of time. Compare the individual health insurance available in your state with the coverage and the cost of the coverage available under COBRA. (To find out what health insurance is available see: www.healthcare.gov .). COBRA gives you 60 days to decide whether to keep the plan you had. If you decide to continue your health insurance, coverage is retroactive to the day you lost your job or received your COBRA election notice. COBRA pays for medical expenses incurred in the meantime.
- If COBRA coverage is cheaper, continue it as long as you can. If private coverage is cheaper, consider keeping COBRA until an open enrollment period which allows you to purchase health insurance with no questions asked.
- Also find out if your health insurance has an extension. Extensions aren't talked about a lot because they're free. Under an extension, coverage for a health condition existing at the time coverage ends continues for a given period of time (up to 12 months) after a policy is terminated.
- A theoretical alternative if you cannot afford the premiums is to consider purchasing a short term health insurance policy. Short term policies generally cost a lot less than COBRA premiums. However, they are not generally written for people with a pre-existing health condition or people over age 65. Even if you can find such a policy, expect that deductibles run from $250 to $2,000 per illness or injury, depending on how high the premium is.
- To learn more, see: COBRA, HIPAA, Short Term Health Insurance.
Life Insurance: Find out what you need to do to convert your life insurance to individual coverage. Even if you don't need the insurance for your beneficiaries, you can get money from the policy while alive.
- If you cannot afford the premiums, ask a beneficiary to lend you the money. Alternatively, if you're going to sell your policy, you can probably get a loan for the premium from a potential purchaser.
- For more information, see New Uses of Assets -- Life Insurance.
Stock Options: If you have stock options, exercise them before you lose them.
Long Term Disability Income Insurance: Long Term Disability Insurance is rarely convertible to an individual policy. However, if you have such coverage, it's worth checking. To learn more, Long Term Disability
Vacation, Sick Days, Personal Days: You are entitled to payment for vacation days you've earned, but haven't yet used. The same is not generally true with respect to sick or personal days -- but it's worth checking your employer's policy.
- Outstanding Loans Under Retirement Plans If lose your job you'll almost certainly have to repay the outstanding balance within 60 days -- either into the 401(k) plan or into a rollover IRA. Otherwise, the IRS will treat the loan amount as an early withdrawal on which you owe income taxes and an early withdrawal penalty.
- Money In the Plan Which Is Not Vested (employer contributions which are in the plan, but which you do not get to keep when you leave the employer). You lose any benefits in your retirement plan that are not vested if you leave.
- Money In The Plan Which Is vested (belongs to you even though you leave the employer who sponsored the plan). You can:
- Roll over the money into a tax sheltered retirement vehicle of the new employer.
- Roll over the money to an IRA you already have or open.
- If your employer will allow you, leave the money in your employer's plan until you are allowed to use the benefits. OR
- You can take the cash ("cash out").
- Cashing Out Is Not Recommended. This is so particularly if you are under age 59 l/2.- even if you put the cash to good use such as paying down credit-card balances. Cashing out (also known as early distribution) can be expensive:
- There is a 10% penalty for withdrawing your money before age 59 l/2.
- The money is subject to ordinary income taxes.
- You lose the advantage of tax free compound earnings.
- It is your call whether to roll the money into a new employer's 401(k) or into your own traditional IRA. You cannot roll money from a 401(k) directly into a Roth IRA.
- If You Do Roll The Money Into A New Employer's Plan Or Into An IRA
- You have 60 days. If there is a waiting period at the new employer before which you can participate in the retirement plan, ask the new company whether you can join the plan one month early. Not every company accepts transfers, but those that do will often reduce the waiting period for rollovers, or will waive it entirely. You may still have to wait to contribute new money to your new employer's plan.
- Do not get a check. If you do, your current employer must withhold 20% of the money for federal taxes. You can get a refund if you deposit the money into a new retirement plan within the required 60 days. The refund won't arrive until the following year.
Consider the following whether deciding about rolling the money into a Traditional IRA or another 401(K) Plan.
- Traditional IRA:
- With an IRA, you can choose your own investments.
- You can also make withdrawals under certain circumstances. For example, if you are a first-time home buyer (someone who hasn't owned a house in the past two years), you can take $10,000 from an IRA without paying a penalty.
- Once the money is in an IRA, if your adjusted gross income is less than $100,000, you can convert a traditional IRA to a Roth IRA. You pay tax on the amount you convert in your highest tax bracket. If your income is low, and your medical condition is under control, this may be a reasonable action in return for tax-free income lat retirement.
- Most companies allow you to borrow against your balance. You also possibly receive expert advice about investments. On the other hand, it may not be a good idea to leave your money with your former employer forever. It's easy for them to lose track of you. You may even lose track of them if there are mergers or they go out of business. If your balance drops below $5,000, your employer could cash you out of the plan.
- To learn more, see: IRA: Traditional, 401(k).
NEGOTIATE FOR WHAT YOU WANT
IYou have nothing to lose by asking. You may be surprised at what happens. For example: Do you want to be able to use your office and telephone etc until you find a new job? Keep your lap top? PDA? Company car?