The startling 14.7 percent unemployment figure released last Friday bears even more sobering news for Latino workers: Among Hispanics, the unemployment rate stands significantly higher, at 18.9 percent. In part, that’s because a greater share of Latinos work in some of the hardest-hit industries, such as hospitality, dining, and retail. Many others are small business owners, sole proprietors, or independent contractors also at greater risk for loss of income.
If you’ve recently been laid off, or are concerned about the prospect, it’s important you understand the rights and resources available to you.
Unemployment, PPP loans, and other wage replacement
For most workers, unemployment benefits are the first line of defense in the event of lost wages due to layoffs. Benefits.gov provides a comprehensive unemployment assistance page in both English and Spanish to help laid-off workers identify unemployment resources in their state.
In addition to the coronavirus stimulus relief checks most taxpayers have received in recent weeks, the recently-passed CARES Act also buttresses state unemployment funds, and provides an extra $600 per week in unemployment benefits for most workers. Independent contractors and gig workers now also qualify for unemployment benefits, based on their most recent tax return filings.
For sole proprietors, it may make more sense to apply for a PPP (Paycheck Protection Program) loan from the Small Business Administration, which will cover up to 250 percent of your monthly payroll cost for eight weeks. The maximum yearly pay covered is $100,000, so obtaining PPP funds may provide more relief than unemployment insurance for higher-earning sole proprietors or independent contractors. Keep in mind, you can’t apply for both a PPP loan and unemployment insurance, so choose wisely.
The needs of Dreamers and other undocumented workers aren’t addressed by the above programs, since both require a valid Social Security number and legal status. However, several immigrant rights’ groups have created excellent resource pages which list local and state resources for refugees or undocumented workers, such as cash assistance and grant programs, rent relief, food banks, medical assistance, and support with renewing DACA status or other legal aid.
Health insurance options
If you lose your job, you’ll typically qualify for COBRA continuation of your existing insurance for up to 18 months, including any coverage for your children or spouse. Still, many now-jobless workers may find the cost of COBRA continuation too expensive, so you should understand your other options, as well.
Being laid-off or otherwise losing your job is a qualifying event that enables you to purchase health insurance through the ACA online marketplace. You may qualify for subsidies based on your income, thus making health insurance more realistic during a time of unemployment. Plans offered on the ACA marketplace must cover pre-existing conditions and are generally of good quality.
A third option involves buying private insurance outside of the ACA marketplaces. Temporary or catastrophic plans may seem like suitable options, but read the fine print carefully: Some don’t cover pre-existing conditions or may have very high out-of-pocket costs, low coverage limits, or other limitations which may make the plans less desirable, depending upon your circumstances — especially if you or a family member on the plan becomes acutely ill.
Finally, know that under the CARES Act, COVID-19 testing is free, even for the uninsured. You also cannot be denied emergency care at a hospital due to a lack of insurance, though it is strongly recommended you carry some form of insurance at all times.
Vacation pay, severance, and back pay
Depending on your state and company, you may be entitled to a pay-out of any unused vacation pay or PTO. Check with your HR department to see if this applies in your case. You will also be entitled to compensation for back pay.
Some employers may choose to offer severance for long-term employees, though this is not required by law, and varies by company and employee. Under the Older Workers’ Benefit Protection Act, workers over 40 have 21 days to review and decide on any severance package; if you’re facing mass layoffs, that period is even longer, so take your time to assess your severance package and determine whether anything can be negotiated with your employer.
HSAs, life, and disability insurance
Any balance in a Health Savings Account is portable and yours to keep when parting with an employer, and the funds can be used to pay for COBRA health coverage continuation, telemedicine, or other health-care costs post-employment separation. You can also withdraw funds to compensate yourself for past out-of-pocket expenses.
Depending upon your employer and insurance plans, some forms of life and disability insurance may also be portable, especially if these are supplementary, or “add-on” plans that you’ve purchased beyond your standard employer offerings, Consult with your HR department to determine the portability of these plans, or any other options available to you.
401(k) plans and pensions
If your 401(k) balance is $5,000 or greater at the time of separation, you can keep your funds in your company’s existing 401(k) plan. This can offer several benefits, including avoiding the stress of managing a rollover and forcing your hand out of the proverbial 401(k) cookie jar. If your balance is under $1,000, your company may just write you a check, and it will be taxed as a contribution. If this is your situation, consider whether you’re able to roll over the funds into an IRA to avoid distribution taxes. If your balance is between $1,000-$5,000, your company is required to help you manage the transition of your funds.
Keep in mind that if you have a 401(k) loan outstanding at separation, the balance will become due immediately, generally within 39-60 days. If you’re unable to pay the balance, the remainder will be deducted from your 401(k) account and treated as a taxable distribution.
Depending upon the provisions of your company’s pension and to what degree you’re vested, you may be eligible to retain all or a portion of any pension plans. Some companies may also allow a cash-out of benefits, while others won’t make distributions until you reach a certain age. Consult your HR department or pension plan documents to ascertain which is true in your situation. Generally speaking, you should avoid cashing out pensions, as this increases the likelihood that you’ll spend the proceeds.
Each job separation situation is unique, and this list is not comprehensive, so speak with your employer or plan administrators to help better understand your options.
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