“If I receive severance payments over time, will that count toward the time I need to vest in the company retirement plan?”

Question: Our company is going through a reorganization. I have only four months to go in order to fully vest in our Retirement Plan.

I work for a new Department Head, and she is bringing in her own people to staff the department. My contract was approved for another year prior to her becoming my Department Head, but I know she wants to replace me with a friend of hers.

What do you think my chances are of negotiating a severance package to last at least four months so that I remain on the payroll and get to my vesting date?

         San Francisco, California

Answer: Maggie, I receive many questions like yours from people who are near vesting in their retirement, stock or other benefit plans. Like you, they all fear losing out on significant benefits earned over years for a reason they cannot control.

First, you must understand that almost every retirement plan I have ever seen says words to the effect, “You must be a full-time employee in good standing on the date of vesting in order to vest.” On the other hand, severance is not generally paid to employees, but only to former employees. For this reason, I believe it is very unlikely that your employer would count time that you are being paid severance – which is only paid to former employees – toward vesting in the retirement plan. You must read the retirement and severance plans very carefully on this point, or send an email to the Head of Human Resources and ask him or her to give you information on this very point.

Second, you might be able to negotiate a “pre-termination notice period,” which means an agreed upon period of time BEFORE termination that lasts a day or more past your retirement vesting date. Under this scenario, you would remain a full-time employee in good standing until the vesting date, and then, as a former employee collect severance.

This second path is often referred to as “Negotiating a Bridge to Retirement,” and I have written a newsletter on that exact subject, entitled “12 Steps to Negotiating a Bridge to Retirement. ” To read it, just [click here.] 

I have also written a Model Letter to assist you in Requesting a Bridge to Retirement. To obtain a copy, simply [click here.]

Third, I suggest you may be best off by writing an email to Human Resources, telling them your concerns, and expressing the thought that this might even be motivated by a desire to deny you your retirement. You might even “cc” it to the CEO.  DO NOT offer to leave, with or without severance, but insist on staying on at least the four months. And make sure you are EXPLICIT that THIS IS NOT A RESIGNATION, but the opposite. Generally, steps like these help employees in your circumstances. There are no guarantees, but in my experience this is what “works.”

Hope this helps. Thanks for writing in. It would be great if you could write back in a month or two to let us know how you did. 

Best, Al Sklover

P.S.: Severance can be confusing? You might be interested in our Master 94-Point Severance Negotiation Checklist, to give you the freedom from worry that you forgot to raise or entertain certain points of discussion and negotiation. To obtain copy, just [click here]. Delivered by Email – Instantly! 

Alan Sklover’s Timeless Classic, Newly Updated and Revised

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What Your Employer Does NOT Want You to Know
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© 2010 Alan L. Sklover, All Rights Reserved.

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