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Work: Changing Your Job Or Career

How To Review Benefits From Your Current Employer Before You Agree To Change Jobs

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Before  changing jobs, take a good, hard look at our current benefits. Look at the following. Also consider what other percs you have from work which you will lose -- such as a company car, or an expense account. (While it may be surprising, you can negotiate to take these items with you even though you are leaving voluntarily. For more information, see Changing Jobs).

  • Salary and other compensation. Look at:
    • Unused benefits such as vacation, personal and/or sick days to which you are entitled. Your employee handbook will generally indicate what happens to unused benefits should you leave.
    • Whether your employer offers severance pay to employees to leave voluntarily. Generally such pay is a lump sum payment based on a formula tied to the number of years that you have worked.
  • Stock options
    • As a general matter, most stock options end if an employee voluntarily leaves an employer.
    • Check your plan. If there is a profit in the options, perhaps you can exercise them now – before leaving.
  • Health, dental, vision and prescription drug coverages
    • Health, dental, vision and prescription drug coverages can probably be continued under COBRA or a similar state law until you become eligible for similar benefits from the new employer. COBRA gives you the right to continue health coverage for at least 18 months, and possibly as long as 36 months -- although you will have to take over paying for it.
    • If COBRA is not available, consider exercising your rights under HIPAA to convert your insurance to individual coverage.
    • If you don't qualify for a conversion under HIPAA because you haven't had 18 months of continuous coverage, then convert the group plan to individual coverage under the conversion privilege under your policy.
    • First look to convert under HIPAA because you will probably receive better coverage than under the limited guaranteed conversion right found in most group health insurance plans.
    • If there is a gap when you can't afford medical coverage, check the terms of your policy to see if it includes an "extension," or provisions that provide an extension even if they don't use the word. Under an extension, any medical condition you had before coverage ends continues to be covered for a period of time after the end of the coverage without any further premium payments. Extensions don't cover new health situations -- only those which were paid for under the policy.
  • Group life insurance
    • Group life insurance usually stops when employment ends. However, most contracts permit you to convert this group coverage to an individual policy.
    • This right can be very valuable, particularly if your condition keeps you from obtaining individual life insurance, or you can only obtain life insurance at a price higher than the insurance company charges for a converted policy. The insurance company can tell you how much the premium will be for a converted policy.
    • Keep in mind that in addition to the traditional reasons for having live insurance, there are now new uses, such as Living Benefits and Viatical Settlements. To learn about these uses of life insurance, click here.
  • Long term disability insurance
    • Long Term Disability Insurance is rarely convertible to an individual policy. If you leave your current employer who has such a plan, you probably lose the coverage. (Still, it's worth checking.)
    • The loss can be particularly painful if the new employer does not have long term disability coverage, or has a long period during which you must be employed before it starts, or precludes coverage all together for people with pre-existing health conditions.
    • There is no law which prevents an employer from imposing pre-existing health condition exclusions in long term disability policies.
  • Retirement Plans Such As A 401(k) Plan
    • Outstanding Loans
      • If you quit or lose your job, you'll almost certainly have to repay the outstanding balance within 60 days -- 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.
      • To learn more, see: 401(k) PlanIRA.
    • Money Which Is Not Vested
      • Employer contributions which are in the plan, but which you do not get to keep when you leave the employer are not vested.
      • You lose any benefits in your retirement plan that are not vested if you leave.
    • Money Which Is Vested
      • 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 cash out. Cashing out is not recommended -- 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's 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.
  • 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.
  • 401(k):
    • 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
  • If you do roll the money into a new employer's plan or into an IRA:
    • You have 60 days to complete the rollover. 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.
    • It is not advisable to get the money in the form of 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.

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