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It's now confirmed that severance is lump sum, not on pay dates as they earlier said it might.
Well, that makes things easier. Apply for benefits when the job is lost. Doing so preserves LAG for a possible future unemployment claim a year from now - should you, by chance, find some kind of short-term paying work during the benefit year of that claim. Those new earnings, plus LAG, will enable you to file another claim a year from now.
However, you might want to do some tax planning and wait until next year before actually claiming benefits for those 20 weeks. The lump-severance paid out this year, together with your regular earnings and unemployment benefits, will create a serious tax torpedo (bracket creep, not to mention being 100% taxable), effectively almost doubling your 2016 earnings. Any unemployment benefit you get will go to taxes. There is no real way to tax-shelter lump-sum severance - as I learned when this happened to me in 2009.
You're better off tax-wise by a whole lot if they'd pay this out incrementally - or you somehow can manage to work until December and delay receipt of the severance until next year. If you have that choice, take it. Then, of course, delay filing your claim for benefits, as discussed above.
Last edited by Ariadne22; 07-14-2016 at 04:33 PM..
Is there a buyout taking place? Some of those people might want to call it quits before they transition to the new employing unit.
Not exactly. They are paying severance as far as 2 YEARS out, for people that they want to keep for however long (that they determine) for the integration of systems. But, those people actually have to stay until their end dates, and continue to receive their salary as they work out their time. When that happens, they walk out the door, and THEN get their severance (which in their case, it still actually accrues until that end-date)
If they turn down the offer now, it's a "voluntary quit" and NO severance!
You probably plan to work as long as possible but, if you can (don't know if you saw the edit to my earlier post), try to schedule your termination date so you have as little earned income as possible in the year you receive the severance - i.e., if your end date is Dec. 31, 2016, your severance is paid in Jan. 2017. If the issue, arises ask HR about that. Tell them you are concerned about tax issues with the severance and want to know the payout date. Mine was paid out one or two weeks after I was termed. Hopefully, they do the same. That way you don't have the tax whammy of two-years' salary in one year. Even if they keep you until May 2017, that's better than a termination in October of this year.
That way you don't have the double tax whammy of two-years' salary in one year.
Genius advice. Wish I'd have though of it. I'm always trying to come up with little things like this that can make huge difference, and it completely went over my head.
You probably plan to work as long as possible but, if you can (don't know if you saw the edit to my earlier post), try to schedule your termination date so you have as little earned income as possible in the year you receive the severance - i.e., if your end date is Dec. 31, 2016, your severance is paid in Jan. 2017. If the issue, arises ask HR about that. Tell them you are concerned about tax issues with the severance and want to know the payout date. Mine was paid out one or two weeks after I was termed. Hopefully, they do the same. That way you don't have the tax whammy of two-years' salary in one year. Even if they keep you until May 2017, that's better than a termination in October of this year.
I saw that edit. My meeting is Monday afternoon, finally got notice. Hard to say when my end date will be right now. It could be as early as end of September. It seems that's the most likely right now, but you never know since they are going through so many people.
Genius advice. Wish I'd have though of it. I'm always trying to come up with little things like this that can make huge difference, and it completely went over my head.
lol - thanks. I've always been all about taxes and never make a move without considering tax ramifications. Wouldn't have dime one today, otherwise. Really bugged me the year I got severance - I ended up paying more in federal taxes for tax year 2009 than I had the previous five (or more) years put together.
lol - thanks. I've always been all about taxes and never make a move without considering tax ramifications. Wouldn't have dime one today, otherwise. Really bugged me the year I got severance - I ended up paying more in federal taxes for tax year 2009 than I had the previous five (or more) years put together.
Yeah, I really wish they had stayed with their first choice of paying severance out on our normal pay dates until paid, OR at least offering the possibility. That would help a LOT of people that will get nailed badly on taxes with a lump sum.
Perhaps they do offer that, they aren't really giving all that much time to each person, because there's just too many to go through for notification in a shot time. I've heard you can make another appointment for further clarification individually. As you can imagine, we've all been mostly 'Walking Dead' for 7~ months now, while they've strung us along with "we don't KNOW". So far it looks like only 1 in 5 might be staying long term.
Ok, my end date is end of September. I see this in the separation docs:
Quote:
Unemployment benefits:
"Unemployment benefits are determined by each state's unemployment benefit laws as promulgated and implemented by the state unemployment agencies. In the event I apply for unemployment benefits, I acknowledge that the company has ALLOCATED MY SEVERANCE BENEFITS to the FIRST WEEK that benefits are allowed with respect to my unemployment claim, and then to each SUCCESSIVE WEEK for which unemployment benefits are allowed".
So, what's the laymen's translation of all that legalese? Sounds like nobody is likely to get an actual UEI here. At least until the severance pay has legally "run out". As discussed, severance is now lump sum, will be put in last regular check, can NOT negotiate anything as regarding receipt date.
He won, and two seconds later, the legislator defined "severance."
His situation was different than most. He had a very LONG severance. He'd already made the mistake of applying. There was no way to manipulate his base period. Was going to get nothing, and there were extensions still in effect. There were sufficient dollars on the table to make this worth the fight for some people.
I'll accept what Ariadne22 has said about how severance is treated in MI, but if you want to really research things, you too could be like Wynn if you think it might work in MI.
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