What to Do First If You Lose Your Job
Though it’s normal to worry about unemployment when the economy’s in a slump, it’s wise to be prepared for a job loss no matter what. That’s because employees can be laid off anytime, even when business is booming. Here are some of the first steps to take if it happens to you.
1. Gather any materials you might need.
Depending on your situation, it may be wise to gather important contacts’ email addresses, copies of work you’d like to add to your portfolio or correspondence containing details about your benefits. If you have an employment contract, review it to see if there are any materials you should not take along when your job comes to an end.
2. Assess your insurance situation.
If you’re laid off, insurance coverage tied to your job will probably end soon. This may include health insurance as well as disability and life insurance. If possible, speak with your former employer’s human resources office to confirm when each type of coverage stops. The HR department can also discuss ways to extend your health insurance coverage until you find another job. If the organization doesn’t have an HR department, see if it contracts with a benefits administrator that can answer insurance questions.
One option to explore is COBRA continuation coverage, which provides a temporary extension of the group health insurance you obtained through your former employer. You may qualify for COBRA coverage if your layoff was the result of a merger or downsizing, the organization employs 20 or more people and it continues to offer a health insurance plan. You may also qualify if you weren’t laid off but your hours were significantly reduced. COBRA might not be an option if your former employer files for bankruptcy.
If you opt for COBRA coverage, you’ll typically pay the sticker price of your former employer’s health insurance plan, plus an administrative fee. This can be a significant new expense if the employer used to pay your premiums or other expenses associated with the plan. Make sure you know how much your monthly COBRA premium would be and determine if your budget can handle this amount.
Even if your budget can accommodate COBRA payments, it’s worthwhile to research other sources of health insurance. One is the federal government’s health care marketplace. If you lose job-based health insurance, you’re typically eligible for a 60-day special enrollment period to sign up for a marketplace insurance plan. You might also be eligible for a federal program such as Medicaid, which provides medical coverage and prescription assistance to many people who are struggling to make ends meet.
If your employer has placed you on furlough, a type of unpaid leave, it will usually continue your health insurance coverage. You may even be able to claim unemployment benefits without losing your health insurance benefits.
3. See if you’re eligible for unemployment benefits.
If you're laid off, you may be able to collect federal unemployment benefits. The first step is applying for these benefits through your state's unemployment agency. In Wisconsin, this agency is the Department of Workforce Development (DWD). Its Unemployment Benefits for Claimants page is a good starting point.
Rules vary from state to state, as do the payments you're eligible to receive. Generally speaking, your benefits are considered taxable income and last 26 weeks. This term may be extended in times of large-scale unemployment such as the COVID-19 pandemic. The CARES Act, a federal stimulus bill passed to address this crisis, makes unemployment benefits available to some people who wouldn’t normally qualify for them. It’s also the source of the stimulus check that many taxpayers will receive. If you live or work in Wisconsin, monitor DWD’s CARES Act page for details about this legislation and related changes to the application process.
To receive unemployment benefits in Wisconsin, you’ll need to file a claim each week. Typically, you’ll need to show that you’re searching for work. However, Wisconsin has waived this rule temporarily due to the COVID-19 crisis. Visit DWD’s website for more information.
4. Take care of your retirement savings.
If you're participating in a retirement savings plan such as a 401(k) or 403(b), you'll be asked how you want your plan assets to be handled after your employment ends. You may be able to leave the assets in your current retirement savings plan, at least for the time being. You also have the right to move these assets into an individual retirement account (IRA).
Keep in mind that you own the current value of your account, a combination of your contributions and any earnings those contributions have produced. Your employer's vesting schedule determines if you own the contributions your employer has made to your retirement savings plan. One such contribution is an employer-provided 401(k) match.
Investment advisors typically advise against cashing out any part of your 401(k). That’s because before the coronavirus pandemic, this money was subject to income tax and, in many cases, a 10% penalty for people younger than age 59½ . However, the federal CARES Act temporarily suspends some of these rules for some people affected by COVID-19. This includes individuals suffering from the illness and those who’ve lost their jobs because of the pandemic. In general, people affected by the crisis can tap as much as $100,000 of a 401(k) without triggering the 10% penalty.
5. Negotiate a severance package.
Unless you have a contract that guarantees you’ll receive severance pay upon termination, your employer isn't required to give you any sort of parting gift. However, it’s worth seeing if your employer does offer a severance package. Check with the HR department if your supervisor doesn't raise the issue.
Some companies offer one week of pay for each year of service. Others provide four weeks of pay. Many provide nothing. There’s no requirement that all employees be treated equally, either, so be prepared to negotiate what you think is a fair settlement. To determine what this might be, do some research. Indeed’s guide to severance pay is one place to begin. When discussing severance, you may want to request:
- Use of your office space, computer, and phone line for a period of time while you search for another job
- Extension of your health insurance benefits for as long as possible
- A prorated bonus for the months you’ve worked
- Cash for any unused vacation and sick days
- A faster vesting period for stock options so you can exercise them
Before you accept a severance package, you may be asked to sign a legal document releasing the employer from any claims you may have. Review this document with a legal advisor to make sure you fully understand its implications.
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