What Happens to Your Benefits When Leaving a Job? A Guide to Changing Your Benefits After Changing Jobs

When transitioning to a new career or employer, remember to evaluate options for your 401(k) and to maintain your insurance coverage.

A group of people happily chatting at work.

Whether it's moving up the career ladder or switching industries entirely, the average American is likely to change jobs 12 times or more.1 There's usually a lot to celebrate with a professional move, but there's also a big to-do list, and it goes well beyond tying up loose ends at your old job and saying your goodbyes.

When you leave a job, you may experience a gap in employer-sponsored benefits between jobs. If you have a chronic health condition or if an unexpected issue occurs while you’re transitioning to your new role, medical bills or other expenses could take a toll on your finances. With careful planning, you can avoid gaps in health insurance and other coverage. Here’s what you may want to consider as part of your changing-jobs checklist. 


How does health insurance work when switching jobs?

Health Insurance
Some health insurance plans will end the day you leave your job, and others cover you until the last day of the month. Check with the HR department to find out the exact date that your coverage will end. If there’s a waiting period for health insurance coverage at your new job, you can continue health coverage from your former employer (at your own expense) through COBRA. Once you’re able to enroll in your new employer’s health insurance plan, you'll want to weigh the costs of the plan. Take into account deductibles, coverage for your family, and whether the plan includes dental coverage, vision coverage, and additional benefits.

If you have a spouse with a job that offers a health insurance plan, do the math to see if it makes more sense to shift everyone to your new plan or to use your spouse's existing one.

Two men shaking hands.

What happens to your 401(k) when you leave a job?

Retirement Plan
Check in with your former employer to find out if you can leave the money in the retirement savings plan or if you need to take it out. You may want to roll over the balance to your new company’s retirement plan or into an individual IRA—traditional or Roth.2 When you decide which retirement plan option is the best for your circumstances, you should also think about  your contribution to the new employer’s plan —based on whether your new employer provides a matching amount and how much it is.

If you have received a salary increase and have the income flexibility, you may want to contact a New York Life financial professional to discuss additional financial solutions that may help you achieve your short-term and long-term goals.


What happens to life insurance when you leave a job?

Life Insurance
Many employers offer life insurance as part of their employee benefits packages, but this coverage usually ends when employees leave the company. Depending on the type of plan you had with your former employer, you might be able to continue with the group policy that was offered or convert it to an individual plan. If you’re interested in an individual policy we can help. One of our New York Life financial professionals can work with you to find the right life insurance policy to meet your needs.

Whether you've recently married or divorced, have added children to your household, or now have an empty nest, we can review your needs and reboot your financial strategies, based on where you and your family are at this point in your lives.


What happens to your disability insurance if you change your job?

Disability Insurance
You can lose the group disability insurance that you get through your employer when you change jobs, lose your job, or retire; however, sometimes these policies are portable. Check with the HR department to see if you can continue your disability plan. If you can’t continue your plan, you can see if your new employer offers a similar benefit and enroll in that plan.

If you decide you want another layer of protection on top of your employer plan, you may want to consider supplementing your disability coverage. Our New York Life MyIncome Protector can provide added financial protection, portability of coverage, and the ability to customize the policy to fit your needs.


What happens to your paid vacation and sick days when you change jobs?

Paid vacation and sick days

While there isn’t a federal law that requires your former employer to pay out your unused vacation and sick days when you leave, many employers do so. Reach out to your HR department to see if you will be compensated for all or part of those unused days. This compensation could help you purchase new health or other insurance and bridge the gap between coverage from your old job to your new job. Please note: Some states have laws that require payment for unused vacation or sick days. Check with your state’s department of labor for the law where you liveAnd check with your HR department to learn your employer’s policy.


Frequently asked questions

Although there is no set policy that is followed by all employers, most will end your benefits on the day you stop working or at the end of the month in which you leave your job. If you’re able to, it’s best to change jobs at the beginning of the month. You’ll often be able to maintain your former employer’s coverage for the entire month.

It depends on what type of benefits you have and your employer’s policies. Check with your HR representative to learn what benefits you may be able to keep active.

When you are fired, you may still be able to receive benefits like health and life insurance, receive payment for vacation and sick time, and transfer your pension into an individual retirement plan.

Unfortunately, you can’t transfer the deductible amount you have paid into your new health insurance plan. Your deductible will start over when you change jobs and enroll into your new company’s insurance plan.

When you switch jobs, your healthcare coverage will end after your last day at work or at the end of the month. If your new employer has a waiting period before you’re eligible for coverage, you can continue your health insurance from your previous employer through COBRA, or you can try to negotiate for earlier coverage with your new employer after you receive a job offer. You should consult your HR representative for more details about your situation.

When you start a new job, it’s a good time to review your financial situation and reboot your financial strategy, based on how your life and/or family has evolved. It’s also a good time to work with a financial professional to fully understand your options and make smart decisions.


Want to learn about more financial strategies?

A NYLIFE Securities Registered Representative can help determine what’s right for you.

1“Number of Jobs, Labor Market Experience, Marital Status and Health: Results from a National Longitudinal Survey,” U.S. Bureau of Labor Statistics, August 31, 2021. BLS.gov

2 When considering rolling over the proceeds of your retirement plan to another tax-qualified option, such as an IRA, please note that you may have the option of leaving the funds in your existing plan or transferring them into a new employer’s plan. You may wish to consult with your new employer, if any, to learn more about the options available to you under the new plan and any applicable fees and expenses. You may owe taxes if you withdraw funds from your former employer’s plan. Please consult a tax advisor before withdrawing funds. 

Investments are offered through NYLIFE Securities LLC (member FINRA/SIPC), a Licensed Insurance Agency and a New York Life company.