For the better part of 30 years, I’ve been working with oil & gas professionals through the booms and the busts. It’s amazing to watch how quickly companies start letting people go. So whether you have been laid-off, or are just concerned about your job, my hope is the following information will help you get prepared. If you are still working and you receive a notification of termination, review this with your Certified Financial Planner, CPA or attorney. I cannot emphasize this enough -- if you have any decisions to make, do not make them alone.
Health Insurance Considerations
If you have already received notification of your termination, the first item on your agenda will be to consider your benefits and how to keep your coverage's in place if needed. All companies are required to offer continued health coverage through COBRA, which is an extension of your medical insurance for up to 18 months, but with you responsible for the full cost of this coverage. Some of the larger oil companies also allow you to keep some other coverage's as long as you agree to pay the premiums. You should receive an outline of the options you have regarding all the various coverage's available to you. If you have worked with your company long enough, and are fully vested, you may be offered retiree medical coverage. This is a benefit you will want to consider carefully, because it generally provides more extensive coverage than what is now offered in the individual marketplace.
It’s also important to speak with your wealth advisor about your pension plan if you have one. Some of the larger companies still have pension plans in addition to a 401k plan. Exxon and Chevron both have pension plans that allow you to take a monthly income option or lump-sum rollover to an IRA. This is a decision that will require some calculations to determine your best alternative. This is a crucial step because, once initiated, it cannot be undone. There are some companies like Shell and Schlumberger that also have a pension plan, but they do not give you the lump sum option, you must choose one of the income options. An advisor can help you with the finer points of each plan. For example, if you have worked for Schlumberger long enough to qualify for a pension, you should start taking the income benefit as soon as you turn 50. Why? Because your monthly benefit does not increase if you wait. If you are able to do so, your first consideration is whether or not to roll over your pension plan at all. If you do, then you need to decide the most appropriate investment vehicle. For tax purposes, it is often in your best interest to set up an individual IRA with a wide range of investment choices. Any rollover to an IRA will be tax-free and continue to be tax-deferred until you take distributions.
Retirement Savings / Company Stock
The next decision you will have to make is with your company 401k plan. Some companies call this a Thrift Plan or a Saving Plan. A number of companies will allow you to keep your retirement plan with them if you so choose. However, you can no longer make any contributions to the plan, and your investment options are limited to those available in the plan. Additionally, if you have been given stock grants/options over the years, you will want to make sure you understand the decisions that need to be made. Some companies allow you to hang on to them until they expire, which should be stated in the original grant information. Other companies will vest you immediately with all of your outstanding stock awards and then give you a limited period of time to sell the shares. Again, this should be outlined in your termination paperwork. You want to be sure to understand the tax implications of selling any shares of company stock by discussing it with your tax professional.
There are a few other items you may not think of, such as taking all of your personal information with you. You will want to take: 1) your business contacts, 2) a hard copy of your final paycheck to verify that your salary and any unused vacation and sick time are paid correctly, and 3) a copy of your separation notice and benefits information, including the benefit providers and their contact information.
Here’s a checklist of things to consider:
o Health, Dental and Vision Insurance Options
o Flexible Spending / Health Savings Accounts
o Employee Assistance Program
o Life Insurance
o Retirement Programs
o 401(k), 403(b), 457, Savings Plan, Thrift Plan
o Other deferred income plans (restoration plans)
o Pension Plans
o Tuition Programs
o Employee Education Programs
o Tuition Aid Programs
o Long-Term Disability
o Long Term Care
o Final Pay Check
o Vacation Pay
o Sick time
o Severance Package
o Collect Reference Material
o Employer Separation Publications
o Important phone numbers, web addresses for you benefit providers
I hope this information will help you with your transition. If you have any questions, please feel free to contact me. Thank you.
Brett Carleton, CFP ®