Layoffs aren’t new, but that doesn’t make it any less shocking when you get laid off without warning. The swift surge of layoffs in the US and around the world due to the coronavirus shutdown is something that we’ve never seen before. For many, this is unfamiliar territory. The purpose of this blog is to give a few actionable items if you have recently found yourself out of a job. Take a deep breath, realize that you’re not alone, and then start to work through some of these items.
OK – I had to get my “fluffy” point out of the way. But during this time remember that it isn’t your fault that you found yourself in the position that you’re in. You didn’t know that a virus was going to cripple the global economy and that the government was going to basically halt your (former) employer from conducting its business. Doom and gloom won’t help you get through this time; there is a light somewhere at the end of this tunnel.
Review formal communications from your employer.
Have a professional (e.g. attorney that knows employment law and knows contracts) review letters that you have received from your employer. Be careful before signing anything! Many times people can be caught off-guard by the job loss and may not be in the right mindset to review and sign documentation. Others feel forced to sign in order to collect any sort of severance pay. Be sure to know what you’re signing and how that will affect you.
Determine what benefits will need to be replaced.
I’m not talking about your 401(k) here – more on that later. A more urgent need will likely be health insurance. Work with your employer and HR department to determine the timeline of when your current coverage will end and when you will need to determine your coverage going forward. You may be eligible for COBRA. Many people are shocked to find out how expensive health insurance can be through COBRA. In actuality, the overall cost to continue your coverage will likely be about the same. However, you are now responsible for the entire premium payment (vs. your employer. They may have been paying a good portion of said premium). Another option is to shop for a health care plan through the Marketplace, a product of the Affordable Care Act.
File your unemployment claim.
Don’t be scared or ashamed to do this! For most professions, your employer has been paying Unemployment Insurance premiums for times like these. The system isn’t designed to pay you 100% of what you were making when you were employed, but a weekly benefit can help you get through some tough financial times. We are also in unique times as the CARES Act will provide some claimants with an additional $600/week! Note that severance pay, if applicable, will likely impact the amount of unemployment benefits payable to you. Tangentially related to cash flow needs, The CARES Act also enabled the IRS to deploy “Economic Impact Payments”, or more commonly referred to as coronavirus stimulus checks. You may not have to take any action to receive your check, assuming you are eligible and have filed your 2018 or 2019 tax return. This could add up to $2,400 (if married) to your bank account, plus $500 per qualifying child.
Review your employer-sponsored retirement plan.
You may be lucky enough to return back to your employer after a temporary layoff (typically called a furlough). If that is the case, you will likely start participating in your retirement plan when you return to work. There are others that have been permanently laid off with no prospect of returning to their former employer. Determining your cash flow needs, finding health insurance, and searching for your next career move should come first. But it is important to determine a plan for your old 401(k), 403(b), or pension plan.
Be careful when considering taking advantage of the relaxed retirement plan rules that were implemented as part of the CARES Act. For example, in 2020 there is no early withdrawal penalty for distributions from qualified retirement accounts and the amount that you are able to loan to yourself from your 401(k) has doubled. You may run into unintended consequences if you utilize these approaches. Just because you can do something doesn’t necessarily mean that you should. Layoffs are short-term; making wise decisions about investing for your future will have lasting effects for you and your family. Don’t make any knee-jerk reactions and talk to a professional advisor first.
I’ll end with a phrase that is becoming all too common at the end of Walkner Condon’s blog posts: This Too Shall Pass.