With the economic downturn and recession looming, companies across various industries are facing an uncertain future. We have been planning with Windstream Holdings client's retirement for decades, and when an offer comes along, you typically don’t much time to act on it. Many give only 2 weeks to 30 days to make a decision. Many organizations are being forced to cut expenses to stay afloat, and unfortunately, that means workforce cuts in the form of furloughs, payroll reductions and forced layoffs.
You have spent decades planning for retirement. Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball. Windstream Holdings has offered you an early retirement or voluntary separation package.
You were planning on retiring in a few years. Now what?
If you’ve received an early retirement offer, accepting it doesn’t mean you must retire from the workforce altogether. It just means that you can no longer work for Windstream Holdings. If you think you may be getting an early retirement package, here are questions to consider as you review your offer.
What is an early retirement offer?
Does it include health benefits?
How does it affect my retirement assets?
How does it impact social security benefits?
What if I don’t want to retire, or can’t afford to?
Can I negotiate my offer?
What if I don’t accept my early retirement offer?
What is An Early Retirement Offer?
Early retirement packages, also known as retirement buyouts, are generally offered to employees who may be approaching retirement age, usually in a company’s efforts to reduce its overall costs.
These packages may include perks in addition to standard severance benefits. For example, an employer may offer an extended salary continuation, a lump sum, payment of healthcare benefits or additional years of service to help employees reach the required time needed to collect a pension.
Some employers may even pay for career counseling or placement services to help you find your next job (if you want or need to keep working), but that benefit may be limited in the current environment.
Does my retirement offer include health benefits?
Health care has become one of the largest expenses for a retiree, even with good insurance. For many, a company’s contribution to your family’s health insurance premium is critical to keeping medical insurance and care affordable.
If you are lucky, your voluntary severance package will extend your health benefits. Companies may include health insurance benefits for a period of time in an early retirement package, but this varies by employer. If your offer from Windstream Holdings includes medical coverage, make sure you understand how long you’re covered for and to what extent. If health benefits aren’t part of your initial offer, consider negotiating for any crucial coverage and premium benefits. Health insurance will be needed until you are age 65 and become eligible for Medicare. However, not all those offered an early retirement package are so lucky.
If you will be on your own paying for health insurance after accepting an early retirement offer from Windstream Holdings, COBRA insurance is always available. COBRA may extend your family’s coverage for up to 18 months. But this coverage is expensive. You might be able to get added to your spouse's health plan if they are still working.
If you still want to work, look into a company that offers health benefits to get you to age 65 You also have the option of entering the open market for an insurance policy. If you don’t have healthcare benefits or don’t yet qualify for Medicare, you may want to consider purchasing a health insurance policy from the Health Insurance Marketplace.
Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
For example, a 60-year-old on a Silver-level plan may pay an average monthly premium of $1,216 in 2022, but this also does not include out-of-pocket expenses, such as deductibles, copays, or coinsurance.
Before making a decision about an early retirement offer from Windstream Holdings, determine if your severance package includes any health care benefits. If not, price out other health care options, such as those available on Heathcare.gov . Can the added expenses be supported with your retirement savings?
How does an early retirement package affect my retirement assets?
Retirement accounts
If you have a Windstream Holdings-sponsored 401(k) plan and are 100% vested, then that money is yours to keep. After leaving Windstream Holdings, you can consider rolling your 401(k) over to a new or existing IRA.
Workers who are 55 or older that take an early retirement package may be eligible to withdraw money from their Windstream Holdings-sponsored retirement plan, such as a 401(k) , without paying the 10% IRS penalty. This only applies if withdrawing from a current employer’s retirement plan, not any past employer. Just keep in mind that while you won’t have to pay the 10% penalty, you will have to pay income taxes on withdrawals from your 401(k).
Note: Rule of 55 works only if you leave money in your 401(K)
Another method to avoid the 10% penalty is to utilize 72t if you rolled you money into an IRA. You will need to take Substantially equal payments for 5 year or at age 59 1/2, whichever is later.
Accepting an early retirement offer or voluntary severance package from Windstream Holdings may require you to begin withdrawals from your 401(k), IRA, or other retirement accounts sooner than you originally expected.
Extra years of retirement can take a toll on your retirement nest egg. In fact, retiring earlier than planned can result in hundreds of thousands of dollars in extra expenses that your retirement portfolio must now support. It may also limit the growth of your assets already invested since you have to spend instead of saving.
Can your retirement portfolio withstand fewer years of contributions and more years of withdrawals? This is the first question you need to answer when making your decision.
When we help Windstream Holdings clients answer this question, we commonly use a cash flow analysis. This allows us to simulate different scenarios side-by-side, and quickly see the impact accepting – or declining – an early severance offer will have on your financial plan.
Pensions
Windstream Holdings employees who have earned a pension may worry that taking early retirement will affect their monthly benefits. Many pension plans partly determine monthly benefits based on how long an employee has worked for the company, so leaving early could reduce that monthly figure.
To offset these concerns, Windstream Holdings may increase the total number of years of service as part of the early retirement package. This can help bridge the gap for those who would receive a reduced pension as a result of retiring early.
Social Security benefits
An early retirement package from Windstream Holdings can affect your Social Security benefits if you leave the workforce before working for a total of 35 years. The Social Security Administration averages your highest-earning 35 years of employment to decide your monthly benefits. For example, if you only worked for 32 years, then the government would add a $0 salary for three years to come up with your 35-year average. That means those three years of unemployment would technically count “against” you.
One potential consequence of accepting an early retirement offer is a reduction in Social Security benefits. Your future pension payments may also be reduced, depending on the language in your separation package.
If you accept an early retirement package, the benefits listed on your statement is not what you will receive. These estimated Social Security benefits assume that you continue to work for Windstream Holdings and make your current salary. As a retiree who accepts an early voluntary severance package, your future income will likely be reduced. This means potentially lower future Social Security payments.
Likewise, your pension statement likely makes assumptions on years of service. If you accept an early retirement offer, your years of service may be less than what your pension statement assumes.
The first step is to determine what your Social Security or pension benefits will be if you accept the early retirement package. We use several different cash flow analyses to determine your future pension benefits and your optimal Social Security selection. Calculating your optimal Social Security and pension depends on the options you have available, your savings, and your spending needs.
Pensions, and particularly pension benefits for those who retire early, often have options for increased payments until the retiree reaches Social Security age. This is usually referred to as a ‘Social Security Offset’ option. This option adds more to your early benefits, but your lifetime benefits may be reduced.
You also will have to consider what portion of your pension would be left to your spouse if you were to pass away in retirement. For most, the peace of mind by ensuring their spouse will receive a sizeable pension, is best. However, this will leave you with lower monthly benefits.
You may know that your monthly Social Security benefit is increased the longer you delay beginning your benefit. But that requires you to likely draw down on your retirement savings more early on in retirement. Social Security increases its payouts by 6.7% to 8.3%, plus an additional increment for inflation, for every year a beneficiary between ages 62 and 70 refrains from collecting a check. Sometimes delaying collecting benefits for just one year could have a huge impact on a successful retirement for married couples. It may make sense for the lower-earning spouse to claim benefits early, while the higher-earning spouse delays.
Therefore, not only is it important to known which Social Security strategy gets you the most money in total, but also which options fits best with your retirement plan. If you are evaluating the early retirement offer on your own, you can start by using the Social Security Administration’s Benefits Estimator .
From there, you can enter estimated future income to arrive at an estimated correct Social Security benefit. Once you have this updated, compare your new estimate to your monthly expenses. What impact will this reduced benefit reduction will have on your retirement plan and anticipated retirement account withdrawals?
Accepting an early retirement offer may force you to tap into your retirement savings, such as your 401(k) or IRA earlier, or it may mean changing when you will need to begin receiving Social Security benefits.
Unemployment benefits
If you decide to take an early retirement package, you may still be eligible for unemployment in certain circumstances. Your state may have its own qualifications, such as a specific period of service with a company before you can claim unemployment after leaving Windstream Holdings.
What if I don’t want to retire early, or I can’t afford to?
If you're unsure about your financial future, you might consider working with a financial advisor to go over your finances and how an early exit package may impact your retirement plans.
If you can’t retire just yet, try to determine if a part-time job will be enough to fill the gaps. If not, can you at least afford to take a pay cut with your next job? If so, how much? Try to map out these answers while also thinking about ways you can cut back on expenses and adjust your budget to accommodate your new income.
If you end up landing another job, your early retirement package won’t be impacted. However, you may want to check for a non-compete disclosure that could prevent you from working with one of Windstream Holdings's competitor for a specified time.
Can I negotiate my early retirement offer?
Just as you would negotiate a salary for a job offer, consider negotiating an early retirement package, too. Some employers may be willing to offer more money in the form of extended salary coverage or a lump-sum, better healthcare benefits or an addition to your years of service. Of course, they may decline, but you won’t know if you don’t ask.
If You Accept a Voluntary Separation Package – Consider Roth Conversions
Roth conversions can be an incredibly valuable tool for those who accept an early retirement offer. They can increase asset longevity and reduce total taxes paid during their retirement.
For those with retirement account assets in tax deferred retirement savings accounts (like 401(k)s and IRAs), an early retirement offer opens up the potential to save significantly on future taxes . Those who accept an early retirement buyout offer from Windstream Holdings will likely be facing a year or two of reduced income before Social Security benefits kick in. These years of reduced income can be the perfect time to convert some assets within your 401(k) or traditional IRA into a Roth IRA.
What if I don’t accept my early retirement offer?
Rejecting an Early Severance Offer
Of course, you have the option to say no to any voluntary severance package offered by Windstream Holdings.
If you want to continue working, or are unable to retire early, this may be your best option. Working additional years can lead to pay raises, promotions, increased Social Security and pension payments, and increased financial stability. However, rejecting an early retirement offer has potential drawbacks, too.
First, there is no guarantee that Windstream Holdings will repeat the early retirement offer in the future. Assuming that another offer will come later is not always a wise move. Second, and more importantly, realize that companies offers an early severance package to its employees to cut costs. If the company’s finances do not improve, there may be much worse outcomes in the future. Windstream Holdings may make layoffs, reduce employee pay, or eliminate other benefits.
What are the implications of the Windstream Pension Plan for employees who wish to retire early, specifically regarding the eligibility criteria and benefit calculations that will affect their financial planning? How does Windstream address concerns for employees who may be contemplating retirement before reaching the defined Normal Retirement Age of 65?
Early Retirement and Financial Planning: Employees may retire early at age 55 with 20 or more years of service, though the pension benefit will be reduced. The reduction is by 1/180th for the first 60 months and 1/360th for each of the next 60 months that commencement precedes the normal retirement date of age 65. This ensures early retirees can still receive benefits, though at a lower amount than if they had waited until age 65(Windstream_Pension_Plan…).
In what ways does the Windstream Pension Plan protect the interests of employees during a potential plan termination? Specifically, how does the plan ensure that accrued benefits are preserved and what procedures are in place to inform employees about their rights under the Employee Retirement Income Security Act of 1974 (ERISA)?
Plan Termination Protections: In the event of plan termination, Windstream ensures all accrued pensions are fully vested. The plan assets will be used exclusively to meet accrued pension obligations before any surplus may revert to the company. Participants are also protected by the Pension Benefit Guaranty Corporation (PBGC), which guarantees most pension benefits(Windstream_Pension_Plan…).
How does Windstream determine the necessary contributions to the Pension Plan, and what role does an independent actuarial assessment play in this process? Additionally, how does this funding approach impact the overall financial stability of the Windstream Pension Plan and the benefits it promises to its participants?
Contribution Determination and Actuarial Role: Windstream’s contributions to the pension plan are determined by an independent actuary who evaluates the plan annually to recommend adjustments based on experience. This approach ensures that the plan remains financially stable and capable of meeting its promised benefits(Windstream_Pension_Plan…).
What options are available to employees of Windstream regarding the forms of pension benefit payouts upon retirement, and how do these options like the Joint and Survivor Annuities differ in terms of financial implications for both the retiring employee and their spouse?
Benefit Payout Options: Windstream offers several pension payout options, including Joint and 100% Survivor Annuity, Joint and 50% Survivor Annuity, and a 10-Year Certain and Life Annuity. These options differ in terms of the benefit reduction applied to ensure payments continue for the life of the spouse, impacting both the retiree’s and the spouse’s financial planning(Windstream_Pension_Plan…).
How should Windstream employees approach the process of claiming pension benefits, especially if their claims have been denied? What recourse is available for employees who are facing issues with their pension claim and wish to understand their rights and the appeal process?
Claiming Pension Benefits and Denied Claims: If an employee's pension claim is denied, they will receive a written notice explaining the reasons for the denial and the specific plan provisions involved. Employees may appeal the decision within 60 days, and the appeal process must be completed within 60 days of the request, with the right to file a civil lawsuit if necessary(Windstream_Pension_Plan…).
Given the frozen status of the Windstream Pension Plan, what should employees understand about their service years and how these years contribute to their pension benefits? How does Windstream communicate these rules to ensure clarity among its employees?
Service Years and Frozen Status: Since the Windstream Pension Plan is frozen, no additional benefits accrue after December 31, 2007. However, employees continue to earn years of service, which count toward eligibility for early retirement and vesting. Windstream provides clear communication through its summary plan description and resources to ensure employees understand these rules(Windstream_Pension_Plan…).
What strategies can Windstream employees employ to maximize their pension benefits and ensure they are making informed decisions about their retirement? How does Windstream support its employees in accessing the necessary resources and information to facilitate effective retirement planning?
Maximizing Pension Benefits: Employees are encouraged to consider their timing of retirement carefully, as delaying retirement closer to the normal retirement age of 65 reduces benefit reductions. Windstream supports retirement planning through its pension resources and access to Merrill Service Representatives who can assist with planning tools(Windstream_Pension_Plan…).
How does Windstream ensure that employees are aware of their obligations under the plan regarding the filing of claims and maintaining updated personal information? What measures does the company take to keep communication channels open for any inquiries or updates employees might need?
Maintaining Updated Information: Windstream emphasizes the importance of keeping personal information up to date, including changes to contact information. Employees are responsible for filing claims in a timely manner, and failure to do so may result in delays or forfeiture of benefits(Windstream_Pension_Plan…).
In the event of the death of a vested Windstream employee, what benefits are guaranteed to eligible spouses under the plan, and how do survivors initiate the process for claiming these benefits? What steps should surviving spouses take to ensure they receive the necessary support and information from Windstream?
Survivor Benefits and Claim Process: In the event of the death of a vested employee, the spouse is entitled to receive a pre-retirement survivor annuity, which may start on or after the employee’s earliest retirement age. The spouse must contact Windstream to initiate the claim process and may receive a lump sum if the benefit’s present value is below certain thresholds(Windstream_Pension_Plan…).
How can Windstream employees reach out to the company’s Benefits Committee or Plan Administrator for detailed inquiries about their pension benefits? What contact methods are available, and what information should employees prepare to facilitate effective communication regarding their pension inquiries? These questions will help employees navigate the complexities of the Windstream Pension Plan and ensure they are well-informed as they approach retirement.
Reaching the Benefits Committee: Windstream employees can contact the Benefits Committee or Plan Administrator at Windstream Services, LLC in Little Rock, Arkansas, or via the Merrill Service Center at 1-800-228-4015. Employees should have relevant information, such as personal and employment details, ready to facilitate efficient communication(Windstream_Pension_Plan…).