Facing SF Employment Severance: Questions About Your Benefits?

With yet another wave of workforce reductions, as a financial advisor, I find myself answering some all too familiar questions.  With anxiety about their future, many SF Employees are asking me to clarify how it will affect their retirement benefits.  Although SF has resources available to answer these questions, I’m still often asked:


  • If I leave before I’m 55, how are my benefits affected, with health, pension and my 401K?

  • Is there a difference if I leave voluntarily or if I’m part of the wave of cuts?

  • How soon can I access my 401k?

  • How soon can I start drawing on my pension?

This is information that’s readily available to all employees, but of course there are variables involved.  Still, it’s easy to assess and get answers.  Keep reading, and you’ll see I’ve provided some answers to the more common questions below.  However, at the root of all these questions, is the one that’s often not initially asked out loud, “How can I salvage my financial future when facing this unexpected early retirement?  How will I bridge that gap and will my family and I be okay?”

Over the years, a regular part of my business has been retirement planning for their corporate employees that are getting ready for their planned retirement date.  So over the years, I’ve become very familiar with their 401K, pension and other retirement benefits.  It had been a status quo financial planning process, that helped launch them toward a happy, planned retirement date. Occasionally the conversations change and the requests become more urgent for an expedited appointment date.

I remember how many people were lined up seeking help a few years ago when severance packages were offered.  It's happened a few more times since then, with the employees anticipating more of the same. They not only want help clarifying their benefits, but also they want help in analyzing their options on how the employment changes will affect them financially long term. 

They often want help with a plan that bridges the gap until normal retirement age, as well as plan that protects them from outliving their retirement funds.  There are concerns about inflation, healthcare costs, market risks, social security filings, and more.  These are just a few of the factors addressed as a part of a comprehensive retirement plan. Before assessing the big picture and finding long-term retirement solutions, here are the common questions that are first and foremost in the minds of those that might be impacted:

“What happens to my 401k?  How soon can I access it without penalty?” When you separate from service, you have the option to leave your 401k in the SF plan, or rollover into an IRA.  You need to understand all of the implications before you make a decision, as a misstep here can be very costly in taxes and penalties.  LEARN MORE HERE If you happen to be 55+ and choose to retire and draw your pension, you will be eligible to take withdrawals and avoid the 10% IRS penalty.  This option is ONLY available from your 401k plan.  If you are not retired and drawing your pension, the soonest you can withdrawal from a retirement plan without the 10% IRS penalty is 59 ½. There are rules that also give you this option in an IRA, but the rules are very strict and not as favorable as the 401k plan. If you think you will need income from your retirement account, but you are not keen on the idea of leaving it with an employer that let you go, then you need to explore all of your options with a qualified financial planner well versed in retirement plans, tax planning, and 72t options.

“At what age can I begin to access my pension benefits?” The soonest you can draw a pension benefit is age 55.

“What happens to my medical benefits, life insurance and HSA accounts after my QTD?” If you separate from employment before age 55, you will not have access to the group medical plan. If you are over age 55, many criteria determine not only your eligibility but the eligibility for your family and how much you will pay in premium. The best scenario is: IF your most recent hire was prior to 1/1/2007 AND you meet the following 3 criteria: you are 55+, with at least 5 years of service and choose to draw your pension immediately, then you qualify for one of two following options based on additional criteria.

  1. IF you were over 50 as of 1/1/2012, then you and your family qualify to remain on the group plan, and SF will share in the cost for everyone.  In addition, you and your spouse are eligible to receive $200 per month in a Health Care Reimbursement Account at your ages 65 to help pay for Medicare coverage.
  2. IF you were under 50 as of 1/1/2012, you and your family still qualify to remain on the group plan, but SF will only share in the cost for you the employee.  You will be responsible for the full premium for your dependents.  In addition, you will be eligible to receive $200 per month in a HRA at you ages 65 to help pay for Medicare coverage, but your spouse will not.
*There are many couples who both work there.  So there is always the chance that if you fall into category two, that your spouse may be in category 1, which would put you back in the best case scenario.  Another scenario is that you each fall into category 2, meaning you would each be covered and SF would share in the cost for each of you.  Any dependent children would not be eligible for cost sharing though.
*Also, please keep in mind there is a significant increase in the premiums you will pay, even with SF sharing the cost, when you move to the retiree plan.

As stated, there are exceptions and other variables which can affect benefits and eligibility.  This is where it may be wise to rely on a financial advisor for the specifics of an individual’s retirement plan.  They can help provide clarity on the specifics of the other criteria and options available based on hire date, age, and years of service. When faced with an employment separation, corporate employees have many questions and concerns regarding the potential for financial volatility in their retirement years.  Often, it’s the questions they aren’t even aware to ask that can pose the greatest threat to their retirement security.  


Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance. She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help their clients avoid a future tax time-bomb.  Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones, with less tax burden, planning makes the difference. Her new book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.

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