Planning for a Recompete, a Layoff or a Shutdown Before It Happens

A recompete puts a date on your income. A layoff or a funding lapse usually arrives with no date at all.

The financial sequence is the same for all three. It works best when you run it before you need it. Here is how I walk through it.

Questions I help executives answer

01 “The recompete was announced. What do I do this week?”

The announcement starts a clock. Use it to decide your thresholds while you are calm.

1. Write down the outcome that makes you stay and the outcome that makes you look elsewhere.
2. Count the months of fixed obligations in your reserve.
3. Hold off on new fixed commitments, such as a larger loan or lease.
4. Confirm beneficiaries and emergency contacts.
5. Read your severance terms, equity forfeiture rules and non-compete language.

Keep retirement contributions and insurance premiums going unless the reserve falls below its floor.

02 “If the job ends, what happens to my health coverage?”

You generally have 60 days to elect COBRA, and coverage is retroactive to the day it ended if you elect in time. A marketplace plan has its own 60-day enrollment window.

1. Get the full COBRA premium in writing.
2. Price a marketplace plan for the same household.
3. Choose before either window closes.

Group disability and group life coverage usually end with the job. A personal policy stays with you.

03 “What happens to my stock and my 401(k)?”

Unvested RSUs and options are typically forfeited. Vested options often have a short exercise window, commonly 90 days.

1. Find the exercise deadline on every vested option.
2. Decide whether the 401(k) stays in the plan, moves to an IRA or moves to a new employer plan.
3. If you have a 401(k) loan, find the repayment terms. An unpaid balance can be treated as a distribution, but the offset amount can generally be rolled over until your tax filing deadline.
4. Ask how any deferred compensation pays. The plan and the tax rules set the timing.

04 “A shutdown stopped my contract but not my job. Will I be paid?”

Federal employees have a history of receiving back pay after a shutdown. Contractor employees often do not. Your employer may place you on unpaid furlough, ask you to use paid time off, or keep you working at its own cost.

1. Ask your employer now which of these it uses.
2. Size your reserve for several weeks without pay.
3. Know your fixed obligations for that window.

The exception is a mass layoff. Larger employers may owe 60 days’ notice under the federal WARN Act, with limits.

05 “Is a gap year ever a good thing financially?”

It can be. Income is often lower, which can make a Roth conversion or selling appreciated shares cost less in tax. Marketplace subsidies depend on income, so the same move can change them.

1. Estimate income for the year.
2. Pick the bracket you will fill.
3. Convert or sell only up to that line.
4. Pay the tax from cash outside the reserve.

The harder part is that the reserve comes first. If the gap runs long, do not use the opportunity at the reserve’s expense.

One page

I keep a one-page transition plan for each client: reserve target, health coverage choice, equity deadlines, retirement account plan and who to call. If you want one built for your situation, book a free 20-minute call with me.

Securities and Advisory services offered through LPL Financial, a registered investment advisor. Member FINRA / SIPC. The financial professionals associated with RPM Financial Group may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.