Big-dollar buyout offers that companies use to entice workers to quit should be carefully reviewed by workers or they could end up harming their financial future, accountants and money advisers warn.
More companies, including General Motors at its White Marsh plant, are offering employees what appear to be lucrative buyout offers.
Last month, General Motors offered eligible workers at its Allison Transmission plant in White Marsh and other GM facilities early retirement deals. Workers with 30 years or more of experience could get a $35,000 lump payment and retire with full pension and benefits. Other workers were eligible to get as much as a $140,000 lump-sum payment.
Workers at the GM van assembly plant that closed last year are also eligible for the deal. The United Auto Workers union Local 239 in Baltimore said about 170 workers accepted the deal, though the union said that number could change.
About 35,000 GM workers across the nation accepted its buyout offer, the company said.
Marc Minker, an accountant and executive with the American Institute of Certified Public Accountants, said workers must also consider the financial strength of their company when pondering a lump payment of monthly benefits.
“If you think your company might be at risk of bankruptcy, that could mean it would terminate its pension plan,” Minker said.
One important item for workers to consider is whether or not the buyout includes the company paying for or partially paying for health care benefits, said Andrew V. Tignanelli, an accountant with The Financial Consultant, a money management and financial advising firm in Lutherville.
“The company may not be offering health care in the package,” Tignanelli said. “That means the employee will have to pick up those costs, which could easily wipe out a lump-sum payment.”
Tignanalli said often the buyout offer serves as a public relations tool for a company that is cutting jobs, but added that the buyout can also benefit workers.
He said it?s sometimes a difficult and emotional time for workers, who face not only a major financial decision but, often, the pain associated with job loss as well.
“Sometimes people with a buyout have optimism, which makes it easier to plan their financial future,” Tignanelli said.
Study tips
» Age, number of children, health and career plans must be considered when contemplating a buyout deal, accountants said.
» Hiring certified public accountant to review your financial needs can cost between $100 to $300 per hour.
» Visit www.360financialliteracy.org to get advice.
