1. Careers
What's in a Severance Package?
 More of this Feature
 Severance Package, Part 1
 Severance Package, Part 2
 Related Resources
 401(k) Options
 About Employment Separation Agreements
 About Non-Compete Agreements
 About Non-Disclosure Agreements
 Am I Entitled to Severance Pay?
 COBRA Health Insurance
 Collecting Unemployment Insurance
 Labor and Employment Laws
 Letters of Reference
 Negotiating Salary
 Preparing to Leave Your Job
 Resumes and CVs
 Social Security Benefits
 Workers' Compensation
 Wrongful Termination
Negotiating Tips
 Don't Just Take it...
 How to Negotiate a Fair Severance Package
 Negotiate a Departure Deal Upfront
 What happens if I ask for a better severance package?

Severance Package, Part 2

Health Insurance

Employer-provided coverage may end on the day you're laid off or soon after. But, by U.S. law, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your current coverage, including qualified physician, hospital, dental, vision and other medical expenses, at group rates plus a small administration fee. If you qualify, your ex-employer should include the paperwork and instructions in your severance package, or tell you where to get them. Otherwise, contact your manager or the HR department right away. You have a limited time to elect coverage before it lapses, but it's a reasonable and retroactive election period.

Your employer might pay the first month or more for you, but eventually, you'll likely have to take over the payments. They're not cheap, especially if you have dependents or full coverage. COBRA is convenient, but you might be able to find a better deal. But be sure to investigate private plans, to see if they have a waiting period before they'll cover you for previous or existing conditions. Read more about COBRA right here at Job Searching: Technical.

Life Insurance

Employer-provided coverage for this also typically ends on the day you're laid off or soon after. Life insurance is not provided under COBRA. But your ex-employer may pay it for a month or more as part of your severance pay and benefits, and then offer a continuance option. It usually isn't cheap either and you may be able to find a better deal. But as with health insurance, new private plans may not cover you for previous or existing conditions. Investigate them thoroughly, before you decline your ex-employer's plan.

Disability Insurance

The same as life insurance. If your employer doesn't offer a continuance option or if you're not covered in the first place, you might be covered under a state disability insurance plan. But, few states provide such a plan. In states that do, the weekly benefit amount might be less than from an employer-provided or private plan. (Typically, the same state office that administers unemployment benefits also administers disability insurance in states that provide it. More about unemployment benefits is below.) The Social Security Administration also offers disability benefits to qualified individuals and their families, but benefits are limited. Be sure to read the fine print of any plan before you decline your ex-employer's.

Retirement Plans

This information explains your options for 401(k), profit sharing and other employer-sponsored retirement plans. According to IRS rules at this writing, your plan administrator must provide a written explanation of your options 30-90 days before the final date on which you must take action. If your savings exceed $5,000 or $3,500 (subject to change) in some plans, you might not have to do anything unless you want to. Your plan will continue to earn or lose depending on market conditions. You can still contribute on your own, but your ex-employer will likely stop matching contributions on the day of your layoff or soon after.

Stock Options

This part of your severance package explains what your choices are for company stocks that you're saving to purchase or already have the option to purchase. Typically, within a certain time after you're laid off, you'll have to purchase the options in which you are vested or lose them. You'll likely lose options in which you are not yet vested, if your ex-employer does not offer other arrangements. If you're in a payroll-deduction plan that saves money for stocks you have not yet purchased, you'll get your money back if your employer offers no alternatives. Stocks you've already purchased are yours to keep or sell whenever you want.

Unemployment Benefits

This info typically includes basic instructions for contacting your state employment service, commonly called the unemployment office, to file a claim for unemployment compensation. The info might also include instructions to apply for job services, training programs and other unemployment benefits. If your employer doesn't provide this info, the unemployment office will.

Severance Package
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"Severance Package" is just a guide and not intended as legal advice. Neither the author nor publisher are engaged in rendering legal services. Please see an attorney for legal advice.

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