These days, it is pretty rare for people to spend their entire career with one company. The advantages to moving around often means the ability to move up in your career path, or to get a better salary.
Depending on your industry, changing jobs frequently is business as usual. Regardless of how long you have been with your current employer, taking the time to transition your benefits helps you to tie up loose ends quickly.
You shouldn’t expect your current employer to assist you in transferring your benefits, or even notify you that you can do this. This is one of those situations where you may need to educate yourself on what can, and cannot, be done when you change jobs.
What happens to your health insurance?
When you leave your job, there may be a mandatory waiting period before your new company’s healthcare plan takes effect.
In order to stay covered, ask your current employer if they offer COBRA insurance (a type of temporary company insurance) or opt for healthcare marketplace short-term coverage.
Keep in mind with the short-term coverage that it is considered catastrophic insurance and only covers major health events. The deductible is usually very high with these types of policies as well.
Likewise, Cobra is liable to give you sticker shock as well. However, the last thing you want to have happen is to start a new job, have a medical concern, and not be covered.
Keep in mind that your deductible starts all over when you switch companies, even if the new company also uses the same health insurance carrier. So, you will be starting all over with meeting your deductible.
Does your life insurance and disability coverage transition with you?
Most likely, as part of your benefits package you were offered some form of life insurance package as well as a disability coverage policy.
Check to see if your new employer offers life insurance through the same carrier. If so, the chances are very good that you can transfer the coverage.
If you opt not to check on these with your current and new employer, then the cost for you as an individual may be out of pocket and may be much higher.
How can you hang on to retirement benefits when you change jobs?
When you decide to leave your company, it’s important to make sure that you take the necessary steps to “roll over” your 401k and other retirement to your new employer.
Speak with the plan administrator at your new place of employment how to best accomplish this. Most simply have you fill out a form, or they give you a form to take to your current employer.
It might be too late to wait until after you have already started your new job. It’s important to complete this step well in advance of leaving your job.
If you do this right, there shouldn’t be any tax consequences. So, it can literally pay you to do this early, and do it right.
Rolling over is a financial term that simply means you move the assets or benefits from one place to another without losing time, investment dollars, or receiving penalties.
Whatever you do, do not withdraw the balance or have a check made out to you because you can be immediately charged 20% for income taxes.
If you are younger than 55, then an additional 10% can be taken out. You generally have 60 days to get the money into your employer’s new retirement products, or into your own IRA accounts.
If you discover that your new job does not offer a 401k plan, speak with your banker about rolling your 401k money into a tax deferred IRA. The general timeline is around 30 days for your retirement benefits to roll over into a new
Rolling your 401k into an IRA, either traditional or ROTH, means there will be no tax consequences. If you simply withdraw the money from your 401k, then the IRS sees that as income and you are taxed accordingly.
If you have taken a 401k loan from your current employer, keep in mind you may be asked to repay that loan in full before you leave. Not clearing the books, or continuing to make payments as before, most often is reported by your former employer as a withdrawal of the 401k money and you can be taxed on it.
What happens to your flexible spending account (FSA)?
If you had a flexible spending account (FSA) or a health savings account (HSA) through your previous employer, then make sure your new employer offers something similar.
In most instances, you can simply transfer that to an HSA with your bank. Most FSAs, if funded by your company, are not transferable, but it cannot hurt to ask.
Does your new job offer dental and vision plans?
If your previous employer’s coverage includes dental and vision plans, make sure you have comparable coverage with your new employer.
However, if the plans cost more with your new employer, you may elect to discard the vision plan, as more often than not vision care is affordable in most locales.
Dental coverage is something you may want to have, but make sure you receive a copy of the dental plan from your new company so you can see what is actually covered.
Will you need moving expenses?
If your new job entails a move, then consider asking for moving expenses to be covered. Scout out the area you will be moving to, read reviews, and speak to others you may know who live in that area.
If your new company is paying for the move, then make sure you have filed the proper paperwork and are aware of what the rules are. In some instances, your new company may only cover certain types of moving expenses, leaving you to handle the rest.
Other companies might cover your full moving expenses, but want you to pay it out of your own pocket first. Then, you might need to submit receipts for reimbursement. Unfortunately, moving expenses are no longer tax deductible.
By Admin –
