Severance Agreements: Job Lost and Benefits at Risk?

Here’s How to Hold onto What You’ve Earned

Losing your job in New York? That alone is hard enough. 

But then comes the gut-punch most people don’t see coming. Your health insurance vanishes, your 401(k) starts floating in limbo, and all those extras like life insurance or tuition help? Gone, unless you fight for them.

You’ve spent years earning those benefits. You deserve to keep as much of them as possible. 

We know how stressful and confusing this moment can feel. You’re dealing with bills, job searching, and now trying to untangle a mess of benefit paperwork. Our business transaction lawyers at Horn Wright, LLP, help people across New York make sense of it all.

Don’t Let Your Health Coverage Disappear Overnight: COBRA and Severance Can Help You Stay Protected

If your employer had 20 or more people, you may qualify for coverage under the  Consolidated Omnibus Budget Reconciliation Act (COBRA). 

In New York, that timeline can extend up to 36 months under the state’s continuation coverage law. This applies even to small businesses.

• COBRA premiums average $599/month for individuals, and $1,739/month for families. You’re now responsible for the full premium, including what your employer used to pay, plus a 2% fee.
• You have 60 days to opt in. Miss that, and you're out. If something happens after the deadline, you could be left with no coverage and a pile of medical bills.
• New York State of Health may be a more affordable option. If your income dropped, you may qualify for subsidies that bring premiums down significantly.
• Some employers help with COBRA costs in your severance package. Even a few months of paid coverage gives you room to breathe and regroup.
• Short-term health plans or Medicaid may fill the gap. Depending on your situation, these alternatives could offer temporary, low-cost protection.

Your 401(k) and Pension Aren’t on Pause, They’re in Play. Here’s How to Protect Your Future.

Losing your job doesn’t mean losing your retirement, but it does mean making smart decisions fast.

• Leave it where it is. You can usually keep your 401(k) with your old employer if the balance is over $5,000. But you can’t add to it, and investment options may be limited.
• Roll it into Individual Retirement Arrangements (IRAs). This gives you flexibility, control, and continued tax-deferred growth.
• Transfer it to your new employer’s plan. This makes managing fewer accounts easier, as long as the new plan allows rollovers.
• Avoid cashing out. Early withdrawals come with penalties and taxes that shrink your balance.

For pensions, check your plan documents. If you’re vested, usually after five years, you may be entitled to a future monthly payout or a lump sum.

Life Insurance, Tuition Help, and the Stuff No One Thinks About Until It’s Gone

These benefits feel small, until they’re gone. 

You don’t realize how much you depend on them until you’re suddenly without coverage, cash, or support. When you leave a job, it’s easy to overlook the financial safety nets tied to your employment. 

That’s a mistake that could cost you more than you think.

Group Life Insurance Isn’t Forever

Most people assume their life insurance travels with them when they leave a job. It doesn’t. 

Group policies typically end the moment your employment does. But here’s the part many folks miss: you often have a short window of about 31 days, depending on your plan, to convert that group coverage into a personal policy without going through a medical exam.

Miss that window, and you may lose the chance to stay covered, especially if your health changes before you can secure a new policy. It’s one of those details that’s easy to ignore until it’s too late.

Tuition Reimbursement Might Come Back to Haunt You

Free education sounds great until it becomes an unexpected bill. Many employers offer tuition assistance, but they often include clauses that require repayment if you leave too soon. That’s right: if you take the money and run, you may owe it back. 

Some places, like the Fashion Institute of Technology (FIT), make this even more specific. Your benefits might not count unless your class has already started before your employment ends. So if you’re planning to resign, check your dates carefully. 

It’s better to be informed than surprised.

Small Perks Can Disappear Overnight

Commuter benefits. Gym stipends. Wellness reimbursements. Many of these programs stop immediately when your employment ends, and if you haven’t submitted your expenses, you could lose out. 

Some plans offer a brief grace period to turn in receipts or use remaining balances, but not all do. It’s worth reviewing those timelines now instead of assuming you’ll have access later.

If you've ever worked with a commercial contract attorney in New York, you’ve probably seen how easily overlooked terms can turn into big problems. The fine print matters more than you think.

Losing Benefits Isn’t Just Annoying, It’s Expensive. Really Expensive.

The financial impact of losing your benefits can snowball fast.

• Health insurance costs can triple overnight. Individuals might spend $7,000+ annually on coverage, and families can see costs exceed $20,000. And that doesn’t include deductibles or out-of-pocket medical expenses.
• Your 401(k) stops growing when employer contributions stop. Missing even a year of matching could mean tens of thousands lost over time.
• Life insurance outside a group plan costs more. That $5/month policy through your job can jump to $35+ privately and you may face health underwriting.
• Tuition repayment can drain your budget. If you're expected to return education assistance, it could be due immediately.
• Unused Flex Spending Account (FSA) and childcare benefits disappear. That money is often forfeited, and daycare or after-school care can suddenly cost hundreds more each month.

If you're exiting a company amid larger deals, these issues often come up during business sale and purchase agreements. Benefits affect real dollars and your financial stability.

You’ve Got Leverage. Use It to Negotiate Extended Benefits That Work for You

Don’t assume your severance agreement is set in stone. There’s almost always room to ask for more. Employers often want smooth exits, which gives you leverage if you use it.

• Ask for COBRA Coverage Extensions. Health insurance is negotiable. Many employers will agree to cover 3–6 months of COBRA premiums if you ask. It’s a practical benefit with real value, especially during layoffs.
• Push for Vesting of Retirement or Stock Plans If you’re close to a vesting date, speak up. Employers may extend your official end date or accelerate vesting so you qualify. It costs them little and can mean a lot to you.
• Convert Group Life Insurance Before the Deadline. Most plans give you about 31 days to convert your group life insurance into an individual policy. You won’t need a medical exam but only if you act fast. This can be a lifeline if you’re not insurable elsewhere.
• Request Tuition Repayment Forgiveness. Repayment clauses aren’t always enforced during layoffs. Employers often waive them if your departure wasn’t voluntary. You just need to ask before signing anything.
• Review Everything with a Lawyer. Never sign a severance agreement without legal review. Clauses about non-competes, claim waivers, and post-employment benefits can carry long-term risks. If you’re launching a business, consult someone who knows the local employment and startup law.

And if your departure is tied to ownership or equity transitions, consult with mergers and acquisitions lawyers. The overlap between personal and corporate interests is where a lot of risk hides.

Let Horn Wright, LLP, Help You Protect What You’ve Earned

We help New Yorkers get what they’re owed when a job ends, but their financial life shouldn’t. 

Whether you're managing severance, protecting your 401(k), or negotiating COBRA extensions, we’re here to advocate for you. We also provide corporate governance legal advice in New York. 

Our experienced business transaction lawyers at Horn Wright, LLP, understand how your personal and professional finances intersect. It’s part of why we’ve been recognized as one of the country's top law firms. 

You earned these benefits. Let’s make sure you keep them. Contact our office today to request your complimentary case review.