Go to your CPA who does taxes. He or she will have an electronic tax library such as BNA. There is a portfolio written by tax attorneys on "Reductions in Force". Get that. Download that into Microsoft Word and have him or her send it to you.

There is more than just 15 months. There's accured personal time off that can be big. I mean a big tax bite that may take you into a higher tax bracket. That's why a lump sum may not be a good "after tax" decision.

Couple of suggestions to add to the above: If the payout will be a lump sum, and it occurs close to the end of the year, consult someone NOW about your tax liability - the lump sum could be tax'd all in this year, giving you a big tax bite. Consult a tax expert, financial planner, acconutant, etc.. Non-Compete agreements: Consult a labor lawyer and see if that's even legal in your state (Indiana) and if tehre's any limits of what a company can impose. Soem are only for geographic areas, some for time limits, some just in industries. If the company is based elsewhere, and trying to impose state law from its home state, that is probably illegal in Indiana. That's what happened to me and soem fellow RIF'd employees 10 years ago, and it got thrown out of court (I'm in Calif, with no non-competes, and the company was in South Carolina, which DOES have non-competes, and all of us had always worked in Calif.). And if you find another job, notify teh new employer, AND copy to your old one, in writing, that you will not disclose any proprietary info from your former employers activities. Good luck, being RIF'd sucks.

I agree fully on being careful about the tax liability on a lump sum payout. My wife does IRS compliance and is an enrolled agent, this was the first thing she said to watch out for when I was telling her about your situation. No-compete clauses are a big beef for me I feel they are improper and impede free commerce. Best of luck in making your decision.

Bill

I would take the lump sum and go look for work. If that happens to be with a competitor, so be it. Should your employer catch wind of it, and try to enforce the noncompete, tell them to sue you. If the do go ahead and sue you, offer them some of the lump sum as a settlement. If they don't take the offer, go before the judge and tell him or her that you need to make a living and that's what's out there. As others have mentioned, noncompete agreements are very hard to enforce.

If that sounds a little harsh, well, that's the employment market we have. Businesses look out for their own interests, you have to look for yours.

I agree with many on this forum who cautioned about a large tax bite associated with a lump sum. But I would still lean towards the lump sum for a number of reasons:
1) Frequently the "tax bite" is really just an extra large tax withholding because, suddenly you got thrown into another bracket for that pay cycle. But, for the year as a whole, you stayed where you were percentage wise.
2) You probably have the ability to defer some or all of the taxes on that money by diverting to a tax deferred IRA or (maybe) 401K.
3) If you take it as payouts, it will feel like you are still on the payroll and reduce your incentive to look for another job.
4) If you take it as payouts, you are still dependent on the organization making those payments -- but a number of things could interfere: such as bankruptcy or they might decide that you violated their non-compete clauses and cancel the rest of the payments.

I like the cash in MY hand. Not theirs...

Sometimes I learn something useful on BF (well, this isn't the 41, so the info percentage is higher here). I'm 54, and have never thought about things in this context. Even though I have very marketable skills (even at my age), and am in one of those jobs that my employer is required to have, mentally going through the analysis is a good thing.

Sorry you have to make the decision, hope I never have to...

Thanks for the advice and kind words.

I'm well aware that my situation is nothing compared to what many people are facing, both in the US and elsewhere. We'll be fine, we just might have to deal with some change.

A couple thoughts....

From where does the incentive money come? My company still has a Defined Pension Benefit Plan and the incentive money comes from that fund and is therefore capable of bing rolled over into an IRA or 401K plan under normal circumstances.

I believe that incentive money from a company's operating expenses will be taxed upon reciept.

downtube24, I don't have any easy answers either. This is happening in a lot of tech companies here in MA. The largest one was Cisco last year. If you were 50 or over, and had ten years of service, you could take their package, consisting of one year of salary at your present rate, and you got to stay in their group health plan for two years. As you mentioned, persons taking the package had to sign away their rights to sue for age discrimination, and some other things.

If I were offered such a package (and it IS possible) I would want to take it to my own attorney for advice. You don't want to sign away too many of your rights. Giving up your right to sue is a given, but I'm not sure about the others.

I remember the days when two of MAs biggest employers, Polaroid and Digital Equipment, were offering buyout packages that were nothing short of a gold mine.

The way I see it there are two cases:- (i) if you are looking to retire anyway then you can just sign and move on., (ii) if you are not at retirement age then you simply must have a sundown clause on those conditions otherwise your whole prospect of further employment is hijacked. It sounds like an absurd contract to me. The company is offering you a few months of pay to never work again effectively. You break that deal and they're going to sue you for the return of that severance money.

Here's what I would do. Don't take the severance money. Tell as many people as you can and the local papers and television station what they tried to do to you, so that others can be warned.

I had 10 years, signed the paper, got my money, didn't go to work for anyone during the time period. I kept my word on taking other employment while "on the payroll". I've been told that those with less integrity have taken jobs during that period without remorse. If you sign the agreement, IMO, you are obligated to live up to the conditions, even if it's to your detriment. Not a popular answer, hope you aren't offended. BTW, my experience was not "optimal" to quote a famous player.

Talk with a doctor. Oops, I mean lawyer. Talking to a doctor and riding more are usually the correct answers.

I am not a lawyer, so take this advice with a *HUGE* grain of salt

...but I was the Director of City Operations for a large national company that utilized similar non-compete clauses in their employment (and termination) contracts, and since one of my duties was hiring, firing, and HR in general, I consulted with the company's legal staff to determine just how enforcible those terms are.

Short answer: Not very.

^I agree wholeheartedly! They won't "come after" you, but, it is nonetheless a legal binding contract. It depends on how seriously you regard those sort of things...

Actually according to some recent court rulings the no-compete clauses are not legal, therefore not a binding legal contract. You need to check your state's laws first.

Bill

Went through simular situation a few years ago. I agree that you need to get legal advice applicable for the state you live in. In my situation I was eligible for retirement and was not concerned so much about the non-work clause. My agreement had a three year limit in which I could not work for any company that contracted with my former employer. Humorous, three years after retirement I was asked to come back as a contractor to work at my old job.

Another feature of my "package" was the option of rolling one year of salary directly into my 401k which I took along with a cash bridge to social security.

FWIW, get legal and financial counsel.

Best of luck

Check with a financial adviser and see if you can't take the lump sum into some form of annuity so that instead of getting the lump sum at once (with the required tax hit) it pays you so much a month for 15 months and you pay the taxes at collection time, with the option if you get another job in less then 15 months of rolling that into a retirement plan. Not only do you reduce the risk of a company going under, but you can get a little extra money in interest.

I wonder if taking a severance with a non-compete clause isn't different than the normal non-compete clauses that many people sign as a condition of employment. The people I know that have had problems with this did not get a severance. In fact, one of them was laid off, and then they sued him when he got a job. Because he was irreplaceable.

Guessing that you are associated somehow with Cummins, since that is THE driver there. The global market for their products is slowing, as it is for many other manufacturers. So, the primary focus can't be on peripheral things like taxes and stuff like that. It has to be on how you are going to prosper in the global restructuring. For that a couple basic rules:
-When you have the opportunity leave and take whatever money is owed you. No responsibility or liability to the former employer. Nor does the former employer have any responsibility or liability to you that they can manipulate, or that circumstances change in the future.
-When you invest your severance money remember that profits, regardless of the investment medium, are only profits when there is cash in hand. So, many people think that paper increases in the stock market or similar are profits. They aren't. Only after tax cash in hand counts in the profit calculation.
-Don't worry too much about the non-compete thing. IF you get an offer from someone else where it might come into play, assuming you sign, iron it out then. Amazing how many times such documents turn out to be psychological tools.
-Take a break, but not too long, to decide what you want to do next. Amazing how many people decide to do something completely different.

Wish you well.

I should add that there haven't been a lot of global restructurings like the present one. So, bottom line, is that you research, make a decision and hope it works out. No one, and I mean, no one has The Answer. Some helpful ideas but ultimately your guess is as good as most anyone else's.

You know, if a severance agreement is being drawn up your best options are:

1) If you are a union member, ask your union for assistance. They will have a legal department who can help you.
2) If you are NOT a union member then state you want independent legal advice before signing. See a lawyer, it may be the wisest $100 or so, you ever spend.

It seems I survived the that round, although several people I know including a couple good friends did not. I could put together a pretty solid team with people let go.

I think terminations this year allow them to charge the cost of severance against 2012, giving them a way shift expenses from 2013 to 2012. Wall Street will like that. When things turn around globally, they'll bring in college fresh-outs to fill the holes. Net result is a younger, lower-paid workforce. Wall Street will like that, as well. Meanwhile, productivity tanks in the short term as people reel from the talent that was walked out the door. Fresh-outs will take years to become as productive as the shoes they are trying to fill. Many of them won't even stay long enough for that day to come.

Congratulations Downtube -- Glad to hear you survived

I worked at a place that was going to do just that. We all kicked in 20, and one guy took the contract to a local lawyer, in our state it was mostly unenforceable. When the reduction went down, several guys went to work for a competitor There was never any suit.

BTW the original company is gone. Competitor is still in business a little bigger but struggling too.

Rod

'Loyalty' to a company?
Not any more.
Look for another job while they make up their mind.
They cannot control your future by tellling you who you cannot work for.
I retired 17 years ago, but the company tried to FIRE me 3 days before I retired!
Then the boss had the guts to telll me the morning I retired, "I'm going to give a nice speech about you today."
Told him "Don't . . . as I will then make a speech that you will not like."

This is why I enjoy working in a family business (General Contracting) and they have returned my loyalty by standing with me through all of my health problems. I had worked many 7 day, 16 hour day/24 hour shifts weeks and holidays (3 years straight with no day off) because I saw the need. I may make less overall but the lack of stress from layoffs, cutbacks, outsourcing, etc. does not haunt me. It is not always easy, times are very hard jobwise right now, but the small business model does work well.

And they let me take time each day to ride or stop by the LBS!!!!!!!!!

Ride Safe and Ride Lots,
Bill