Why Do Companies Make Early Retirement Offers?

Early retirement offers tend to appear when a company wants fewer employees and would rather people leave voluntarily than be laid off. An offer can look generous at first glance. Whether it works for you depends less on the headline number than on your savings, your health coverage, your pension and how many years you were planning to keep working. The questions below are the ones to answer before you sign anything from HP.

How Is the Severance Part Usually Calculated?

Many packages pay a set number of weeks of salary for each year of service, sometimes with a minimum and a cap. Find out if the money comes as one lump sum or as salary continuation over several months, and whether it counts toward a bonus, the 401(k) match or the pay used in a pension formula. Severance is wages for tax purposes, subject to Social Security and Medicare tax, and an employer using the flat supplemental rate withholds 22% federal income tax for 2026 (37% on amounts above $1 million). If your tax bracket is higher than 22%, that withholding may fall short of the tax you end up owing.

How Will Accepting the Offer Affect Your Pension?

Traditional pension formulas generally use your pay, your years of service and your age when payments begin. Leaving early stops service from building and may bring an early-retirement reduction, and the final years of a career often add the most value because pay tends to be highest then. Packages sometimes offset this by crediting extra years of age or service, or by paying a temporary supplement until Social Security, which can begin as early as 62 at a permanently reduced amount, about 30% less for someone whose full retirement age is 67. Ask HP for written pension estimates with and without the offer, and for the lump-sum figure if the plan offers one.

What Happens to Your 401(k)?

If you leave HP in or after the year you turn 55, withdrawals from HP's 401(k) are not subject to the IRS's 10% early-withdrawal tax, though income tax still applies. Rolling the account to an IRA ends that exception for the money you roll. A distribution paid to you, instead of rolled directly to an IRA or another plan, has 20% federal income tax withheld. If you are younger than 55 in the year you leave, the 10% tax generally applies to withdrawals before 59 1/2 unless another exception fits.

How Will You Cover Health Care Before Medicare?

Medicare generally starts at 65, with a 7-month sign-up window around the month you turn 65. Until then, the usual options are coverage paid for in the package, COBRA for up to 18 months at up to 102% of the premium, a spouse's plan, or a Marketplace plan. For 2026, Marketplace premium tax credits stop at 400% of the federal poverty level, which is $62,600 for a single person in the continental U.S.

How Much Time Do You Have to Decide?

If you are 40 or older and the offer asks you to waive age-discrimination claims, you generally get at least 45 days to review a group offer, or 21 days for an individual one, and 7 days to revoke after you sign. For a group program, the company must also tell you in writing who was eligible and the ages and job titles of those who were and were not offered the package. Use that time to have an employment attorney read the release.

Should You Accept?

Accepting may make sense if your savings, pension and health coverage can carry you to Social Security and Medicare, or if you were planning to leave within a year or two anyway. Declining may make more sense if you need the paycheck, your pension still has valuable years ahead, or the health benefit in the package ends quickly. HP is not obligated to repeat the offer, and a later round of cuts could be less generous. A side-by-side projection of both choices, with taxes and health costs included, can show which one holds up for you. The HP plan details below are the starting inputs for that projection.

How Would a 2026 HP Early Retirement Offer Affect Your Pension and 401(k)?

HP's own numbers behind an early retirement offer start with the program it rolled out this year. HP announced a voluntary Enhanced Early Retirement program for U.S. employees in March 2026, open to employees at least 55 with 10 or more years of service; the HP Inc. Pension Plan was amended effective March 9, 2026 to pay EER benefits, an estimated $220 million addition. That Pension Plan has been closed to new entrants since 2008, so participants are already fully vested and can take their accrued benefit as an annuity or, for some participants, a lump sum. On the 401(k) side, if you terminate under a Company-approved severance or early retirement program, you still receive HP's 100%-of-first-4% match for that year, and you become 100% vested in your matching contributions regardless of the three-year cliff.

What Happens to Severance, Your 401(k) Payout and Health Coverage?

HP's Workforce Reduction Plan and its 2023 Enhanced Early Retirement Program are both filed with the Department of Labor as severance-pay plans, together covering roughly 1,400 participants in plan year 2024, though neither filing discloses a benefit formula. At termination, HP's 401(k) pays a lump sum in cash or HP stock, and terminated participants 55 or older can instead take partial or systematic withdrawals. For health coverage before Medicare, HP's Retirement Medical Savings Account lets employees 45 and older set aside money that pays eligible medical expenses once they leave, which they keep in full. Ask HP's benefits office whether the current EER program applies to your group.