By Steve Doster | Mission Valley Money
Qualcomm filed paperwork with the state of California to meet a required notification that significant layoffs are forthcoming. News reports say approximately 1,200 San Diego employees will be let go in June. Layoffs at any company are extremely nerve-racking and difficult for you and your family. During this period of uncertainty, the best advice is to stay positive hoping for the best while simultaneously preparing for the worst-case scenario.
Now is a time to take inventory. Boost up your emergency fund; review recurring expenses that can be cut; understand how much you need for the most critical expenses like housing, food, and utilities. If you own a home, consider getting a home equity line if you do not have six months of cash saved up as an emergency fund.
If you are one of the people selected for a layoff, then face it like any other major life change. This is something you can survive. It will make you stronger and the changes that come from this could very well put you in a much happier place.
The first thing to do is stay calm. Don’t take this news personally. Decisions are made at a very high level and have nothing to do with performance, value of your position, or a reflection of your skills and experience. Layoffs can happen to anyone.
The next step is start taking control of some immediate items. This means reviewing and understanding the layoff information package provided by Qualcomm. Typically, this package will provide information on filing for unemployment, continuing health insurance, and choosing what to do with your 401(k) and stock options.
You will be eligible for unemployment benefits that can be up to $450 per week for 12 weeks and possibly up to 26 weeks for continuation benefits. The amount you receive is based on your earnings over the previous year. An annual salary over $46,700 will receive the maximum $450 per week benefit. You’ll need to apply for benefits before knowing the actual amount. Managing your account online at eapply4ui.edd.ca.gov is the best method to apply.
Maintaining health coverage is crucial. Do not go without medical insurance trying to cut expenses. You have two choices for health insurance. Keep your current insurance through the Consolidated Omnibus Budget Reconciliation Act (COBRA) or get new insurance through the Covered California Health Exchange. COBRA allows you to keep all your current doctors while paying the full cost of your health insurance. Once you are let go, your employer will stop paying a portion of your health insurance. This causes a sizable increase in health insurance premiums under COBRA. However, it’s worth the cost to keep your current doctors and health care system if you are actively receiving treatment or have an upcoming procedure.
Covered California has a special enrollment period during the first 60 days after employer coverage ends. Start researching health plans and costs at CoveredCA.com right away after a layoff. You can easily compare health plans and monthly premiums to COBRA coverage to determine the best option for you and your family. For Covered California coverage, you may qualify for help depending on your income. Find out if you qualify for this “premium assistance” to make an actual cost comparison between COBRA and Covered California.
Finally, understand the choices for your 401(k) and stock options. Nothing has to happen right away with your 401(k) plan. It can stay at Qualcomm for your lifetime. However, it might not be the best move. Compare costs of the mutual funds in the 401(k) plan to the ones you could invest in at a separate custodian like Schwab, Vanguard, or TD Ameritrade. You may be able to get less expensive and better performing mutual funds outside of the Qualcomm 401(k). It’s also easier to manage your portfolio by consolidating accounts at one custodian.
A 401(k) plan held at a former employer can be rolled over to your IRA without any tax liability. Be sure to get help with this from a financial advisor or custodian so that the rollover is executed correctly. The entire 401(k) balance could be considered taxable income if it leaves the 401(k) and is not deposited into your IRA within 60 days.
Stock options are complex. And decisions will need to be made within time limits outlined by Qualcomm. Every employer will offer something different and there are different types of stock options, so read the materials carefully to understand what happens to your stock options. Typically, you will have a specified time limit to exercise any vested stock options before they expire. Most of the time, unvested stock options disappear on your final day of employment. Be cautious and work with a CPA or qualified fee-only financial advisor to help you understand the tax implications.
Going through a layoff will be an emotional time. Remember this isn’t a personal attack. Use it as an opportunity to reset your career and find another job (or maybe even a career change) that will make you happier.
— Steve Doster, CFP is the financial planning manager at Rowling & Associates – a fee-only wealth management firm in Mission Valley helping individuals create a worry-free financial life. They help people with taxes, investments, and retirement planning. Read more articles at rowling.com/blog.