Changing Job? Consider all Your Benefits!
Article written by Scott M Kahan in Hamlet Living - July 2022 Magazine
It’s being called “The Great Resignation.” But many people resigning are actually looking for or starting new jobs. People switch jobs because of a better lifestyle, more money, and better benefits. As you look forward to a new opportunity, consider carefully how to manage employer provided benefits while transitioning from one workplace to another.
Your employee benefits generally end unless you elect to continue them when you leave a job. While you may receive benefits from your new employer, they will most likely differ from your previous employer’s benefits package. So, if there are any benefits you want to take with you, for example, accumulated savings in a 401(k) plan or similar retirement account, you will need to decide how to manage those funds before you exit.
Your new employer may not offer health insurance, or there could be a waiting period before health coverage begins. To avoid becoming uninsured, even for a short period, either continue the current policy under COBRA or get coverage through your spouse’s plan.
To continue coverage under COBRA, you must advise your employer that you elect COBRA coverage. Under COBRA, you are responsible for paying the entire premium, including the employer’s share, thus making COBRA premiums generally expensive. But it’s better to pay the higher premiums than go without coverage for even a short period.
You may also be able to convert other employer-sponsored insurance into individual policies. Depending on the group plan, you may be permitted to convert life insurance, disability income insurance, or long-term care insurance. Depending on your circumstances, continuing some of these coverages may be advisable. Before making final decisions, review all the available new coverages and talk with your current benefits administrator about your options.
Retirement Plan Rollovers:
If you have a 401(k) plan, it’s often best to roll over the funds into another qualified retirement savings account, such as a rollover IRA or your new employer plan. If you have a current loan on this account, you will need to pay off the loan before rolling the funds to another plan. You want to make sure you do this correctly. Otherwise, you could trigger an avoidable tax bill.
Another thing to consider regarding your retirement plan, there are limits to how much you can fund each year. If you have funded your current plan, you will be limited to how much you can invest in the new plan. You do not want to overfund the program since this will create problems when you need to correct this.
So often, we find that people are unaware of the benefits they have access to. Make sure to review the offerings carefully before making your decisions. Before making such important decisions, discuss your options with the benefit administrators at both companies and consult your Certified Financial Planner ™ professional. Your planner can ensure you are getting the most out of your benefits and help avoid potential tax issues.