Severance

[tuffbrk]

What is the name of your state (only U.S. law)? NJ

Any advice on what I would use as a guideline to figure out if I should take severance in a lump sum or over time? From what I can glean to date - it appears that I'd be able to maintain health/dental bene's versus Cobra if I take it over time. That does appear to be the only advantage that I can see in selecting one method of payment over another....

Biggest concern is a repayment of 401K loan. It will need to be paid in full...which is making me lean towards a lump sum. This late in the year, I'm not certain that taking a lump sum may negatively impact me tax-wise?

I cannot identify what other types of issues I should be reviewing prior to making a decision one way or another. My employer has advised that if I agree to take it over time that I can then change my mind to take it in a lump thereafter...

Comments are welcomed!

 

[LdiJ]

What is the name of your state (only U.S. law)? NJ

Any advice on what I would use as a guideline to figure out if I should take severance in a lump sum or over time? From what I can glean to date - it appears that I'd be able to maintain health/dental bene's versus Cobra if I take it over time. That does appear to be the only advantage that I can see in selecting one method of payment over another....

Biggest concern is a repayment of 401K loan. It will need to be paid in full...which is making me lean towards a lump sum. This late in the year, I'm not certain that taking a lump sum may negatively impact me tax-wise?

I cannot identify what other types of issues I should be reviewing prior to making a decision one way or another. My employer has advised that if I agree to take it over time that I can then change my mind to take it in a lump thereafter...

Comments are welcomed!

Withholding is also going to be an issue. If they pay you in a lump sum a ton of extra tax is going to be withheld...unless you do some creative adjustments to your withholding allowances to ensure that the proper amount is withheld.

Also, if you do the creative adjustments and then you get another job right away, not enough tax may be withheld, because your income will be extra high for 2008.

I would lean towards taking it over time, keeping the benefits, and simply making sure that enough is being withheld to repay the 401k loan over that period of time.

Now, that is assuming that you are confident that the company itself is solvent. If you believe that it might not be, then I would take the lump sum (doing creative withholding), get the 401k rolled over into an IRA ASAP, and instead of cobra (assuming that you have no ongoing medical issues) I would purchase a private, high deductible medical insurance policy.

 

[tuffbrk]

Makes sense! Thanks so much....