Recently, General Motors began a weeks-long process of laying off roughly 4,250 salaried employees in a sweeping restructuring of their global operations. Part of this restructuring effort includes the closure of five North American manufacturing plants this year, a move that is expected to save the company up to 2.5 billion in 20191. GM is also reducing its global executive workforce by 25%2.
Our team at Herbert Financial Group (HFG) has spent over 30 years specializing in holistic financial planning for General Motors employees, executives and retirees and we have transitioned hundreds of General Motors employees into retirement. Our advisors have extensive knowledge of GM benefits packages. Our founder, Timothy Herbert, spent 16 years working at General Motors in various human resources departments where he was responsible for budget and business planning. He also held management positions—helping create and implement labor agreements and health & safety procedures for GM and their employees. We have held countless GM specific events, written detailed presentations and even have a dedicated General Motors hub on our website.
Whether faced with early retirement or making a career change, we are here to help make it a smooth and seamless transition. Here are eight crucial areas to think about if you’ve just been handed the dreaded pink slip.
1. RETIREMENT/CAREER CHANGE
Are you financially ready for this? Do you have enough money saved to maintain your current lifestyle? Do you know what expenses you will encounter in retirement? These are important questions to think about, and questions we can help you with.
Check out our interactive pre-retirement checklist to find out how prepared you are.
If you are in your 30s or 40s and retirement is not an option, a career change is on the horizon. Did you know more than 60% of people find their next job through someone they know? In difficult times, make sure people know you are looking for new opportunities. Leverage your network to be tapped into those opportunities as they arise. Have you thought about your next move?
You can also file for unemployment separation and the state will determine if you qualify.
2. YOUR 401(k)
You will have the option to keep your GM 401(k) at Fidelity, roll over the assets to your new employer's plan (if one is available and rollovers are permitted), roll over to an IRA, or cash out the account value. It is imperative to thoroughly weigh out the pros and cons of all options before deciding.
Costs can help to be kept low by leaving your retirement savings within the 401(k), however, it also confines your investment choices. When done properly, transferring a 401(k) to an IRA is a tax-free transfer that expands your investments options. We highly suggest you consult a financial professional before making a decision. The HFG team can walk you through your options and answer any questions you may have.
We encourage you to review a piece by FINRA titled “The IRA Rollover: Ten Tips To Making a Sound Decision.
Your employee classification determines when your GM healthcare will cease.
You are eligible for health care in retirement with company contributions if you are eligible to retire under the GM Salaried Retirement Program and your length of service date is:
- Prior to January 1, 1988 and have more than 30 years of credited service3; or
- Prior to January 1, 1993 and you are between the ages of 55 and 60, and age plus eligibility service equals 85 or greater3; or
- Prior to January 1, 1993 and you are aged 60 or older and have at least 10 years of eligibility service3
If you have a length of service date between January 1, 1993 and December 31, 2000, you are only eligible for self-pay health care in retirement, meaning you pay 100% of the monthly health care contribution.3
If you have a length of service date commencing on or after January 1, 2001, and not eligible to retire, all health care coverage, including dental and vision, if elected, will continue for the duration of your salary continuation payments3.
There are a few options to think about. You can sign up for COBRA, join your spouse’s health plan or sign up for your own policy.
One important reminder: health insurance premiums are not taken from your severance pay. You will need to pay the premium directly. Failure to pay your premiums would result in loss of coverage.
GM health care coverage will be cancelled immediately for any employee, or retiree, or any eligible dependent that is age 65 or older at the time of separation because they will now be Medicare eligible.
HFG can refer you to a Medicare Specialist associated with our team who can help you navigate the Medicare maze. Consultations are no-cost and no-obligation.
5. HEALTH SAVINGS ACCOUNT (HSA)
If you have an HSA with Bank of America you may continue to contribute, however, funding must be submitted directly to Bank of America. Contributions via payroll deductions will stop as of the date of your separation. You will also be responsible to pay the administration fee.
If you are a GM retiree under the severance program, your HSA will remain under the GM HSA program with Bank of America and the monthly administration fee will be paid by GM until you reach the age of 65.
Visit our GM HSA page.
6. MONTHLY OR LUMP SUM PENSION?
If you have a pension with GM, you can defer it to later or choose to receive it as monthly income or a lump sum payout. It is important to consider a number of holistic factors when deciding, such as your health, life expectancy, desire to leave a legacy for your heirs or charity, inflation, taxes, beneficiary benefits, the age of your spouse and children, your savings (beyond pension) and income needed at retirement.
This decision is extremely complex and differs based on individual needs. We highly encourage that you seek the advice and guidance of a financial professional to review your options and choose a course that is in your best interest.
We have an entire presentation dedicated to this topic that we encourage you to take a look at.
7. SOCIAL SECURITY
This pertains to you if you are between the ages of 62 and 70 after your severance runs out. Remember, the longer you wait to claim social security, the more benefit you can collect. There are several holistic factors to consider, including your savings, health condition, life expectancy, taxes and more. Based on your income level, up to 85% of your social security benefits is taxable.
We encourage you to consult with a financial professional before deciding to claim sooner than you originally planned.
8. LIFE INSURANCE
Basic Life, Optional Life and Dependent Life Insurance coverage under Group Variable Universal Life (GVUL) and Personal Accident Insurance may be continued for a maximum of 6 months or for the duration of the salary continuation payments, whichever is shorter.
At the end of the salary continuation period, Basic Life Insurance will be reduced to zero. Life insurance coverages (Basic Life, Optional Life, and Dependent Life under Group Variable Universal Life Insurance (GVUL) – will automatically continue and premiums must be paid directly to Metlife. You can pay for all the coverage, reduce the amount of coverage or cancel the coverage.
Our advisory team can help you review these options.
1 CNBC, February 6, 2019 - https://www.cnbc.com/2019/02/06/gm-says-we-are-already-seeing-savings-from-restructuring.html
2 Source: Reuters, February 4, 2019 - https://www.reuters.com/article/us-gm-layoffs/gm-cutting-4000-workers-in-latest-round-of-restructuring-idUSKCN1PT21Z
3 Source: General Motors, February 2019