Pension and Health Benefits
It is important to determine how your pension or 401(k) rights may be affected by a layoff. These plans vary widely and are governed by a “plan document” that sets out the terms of the plan. Employees are entitled to a “summary plan description” providing basic terms of the plan under ERISA (Employee Retirement Income Security Act). Under the PPA (Pension Protection Act), for a “defined contribution plan” (like a 401(k) or IRA) employer contributions either become fully guaranteed after three years or partially guaranteed after two years, depending on the language of the plan. For a “defined benefit plan” (common in the public sector), employer contributions either become fully guaranteed after five years or partially guaranteed after three years. No matter what, employee contributions are always guaranteed.
If you are terminated and you want to recover your guaranteed funds from your old pension, you may withdraw your funds without any penalty (with the exception of applicable taxes) as long as you put the funds in an IRA within 60 days. If you do not put the money in an IRA, you may be subject to heavy penalties. Talk with your financial institution about the potential consequences of taking the money out early and what taxes you may have to pay as these funds are considered income after they are removed from your retirement account.
Under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, laid off employees are often entitled to continue their or their dependents’ health insurance coverage under a former employer’s group plan for 18 months (or longer in certain qualifying circumstances). COBRA continuation coverage is often more expensive than the amount that active employees are required to pay for group health coverage. While employed, the employer usually pays part of the cost of employees' coverage and all of that cost can be charged to individuals receiving continuation coverage. As a result, you should consider other healthcare options before electing to purchase COBRA continuation coverage. Important timelines apply to the election of COBRA coverage. Generally speaking, an employee and his/her dependents have 60 days from the later of the loss of coverage or the notice of COBRA rights. For detailed information about COBRA rights go to the Department of Labor’s page at: http://www.dol.gov/ebsa/faqs/faq-consumer-cobra.html.
Under the Affordable Care Act (ACA, often known as “Obamacare”), you cannot be denied healthcare coverage for pre-existing conditions. Your employer must provide health insurance benefits for its full time employees if it has at least 50 full time employees. Effective July 18, 2016, the law prohibits discrimination on the basis of “race, color, national origin, sex, age, or disability,” by any healthcare provider that receives any form of HHS (U.S. Department of Health and Human Services) funding, and the vast majority of providers receive some form of funding from the HHS, even if it is just a tax credit.