Leaving or Changing Your Job? SFG Executive Chuck Steege Says "Think Twice About Your Compensation"

It’s official: According to the Labor Department, the economy has lost 5.1 million jobs over the past 15 months. As if those numbers weren't scary enough, the figures show a disturbing trend: The number of long-term unemployed has continued to rise. According to Executive Financial Coach “Chuck” Steege, president, SFG Wealth Planning Services, Inc., senior executives, too, might find themselves unemployed longer than expected. “That’s why it is critical to stay focused and organized,” Mr. Steege said recently, “While moving quickly to take those actions that will be most financially advantageous from the perspective of their executive compensation package.”

Mr. Steege founded the fee-only financial planning firm and SEC Registered Investment Advisor some 15 years ago. Dedicating to meeting the needs of senior executives and their employees, SFG and its resource center at www.SFGADVISORS.com aim to provide answers to a wide range of complex stock-based compensation and planning challenges.

Senior executives should keep in mind that the very skills and values they practiced successfully on the job are just as valuable during a period of unemployment. “While hardworking, devoted and conscientious, many may forget key actions and deadlines regarding their compensation in the emotional heat of the moment as they head out the door,” Mr. Steege added.

While entitled to an attractive array of assets and benefits from a company, those advantages can be snatched away if four immediate and near-term actions are overlooked: Building a budget, managing stock options and restricted stock, developing a deferred compensation strategy and maintaining insurance.

“Cash flow is king,” Mr. Steege said. “Without bread and butter on the table nothing much matters. All asset sources must be examined. Perhaps there is money accumulated elsewhere that can be brought into play. It is helpful to think of your money pool as a venture capitalist would: Your resources have a burn rate of six to 12 months toward supporting your search for the next job.”

Once the broader issues of budgeting are addressed, executives should start to consider actions to take regarding their plans for stock options as well as restricted stock.

“It is important to keep in mind that once you leave your job, you have 90 calendar days to exercise your options and receive your vested stock – or forfeit your options,” Mr. Steege said. “Paying for your stock as well as receiving the proceeds from selling shares may require a series of steps: You may choose to divest some of your stock to pay for the exercise of additional shares, net of taxes. Or, you may wish to combine cash from stock sales and other available to cash to pay for your shares.”

Executives should next take a close look at their deferred compensation and retirement plan situation. “Executives may have a lot of discretion in how they receive deferred compensation at separation. It helps to check with the human resources department to review the details.”

Insurance coverage, too, must be considered at separation. Mr. Steege noted: “You can continue your health insurance for 18 months under The Consolidated Omnibus Budget Reconciliation Act (COBRA), which gives workers and their families the right to continue group health benefits for limited periods of time. If you elect the portability of your employer’s plan, though, you must also consider the possibility that insurance coverage could skyrocket in price. The company’s insurance company will likely assume your risk is very high – otherwise you would not have chosen to continue coverage.”

Whether an executive is leaving a company voluntarily or involuntarily, it is crucial not to be short-sighted. “Collect the information you need to organize your plan of action,” Mr. Steege added. “If you need help, your accountant or financial advisor can lend assistance. But most importantly, act quickly to gain the maximum advantage from your executive compensation.”

“After all,” Mr. Steege concluded, “You earned it.”