Benefits When an Employee Leaves

Every benefits exit starts with one lookup: what does the plan document say coverage ends? Last day worked and last day of the month are both common; the answer drives everything downstream — the COBRA chain (event reported within 30 days, election notice within 14, the beneficiary's 60-day window), the employee's 60-day marketplace special-enrollment period, and the severance negotiation if there is one. The clean employer move is a single written statement in the exit packet: coverage end-date, COBRA rights and cost, and the marketplace alternative — because an employee who understands the marketplace option often chooses it over COBRA, saving both parties money and administration.

The accounts diverge completely. Health FSA: plan money — claims incurred through the coverage end-date are payable (submitted within the run-out period); the rest forfeits unless the employee elects FSA-COBRA, rational only when the balance left exceeds the premiums left. An employee who spent ahead of contributions owes nothing back — the uniform-coverage rule cuts both ways. HSA: the employee's property, full stop — employer contributions included, portable forever; your only tasks are stopping payroll contributions and pointing them to IRS Publication 969 for what happens next. HRA: whatever the plan document says — typically access ends at separation, subject to COBRA rights in the account's value.

At separation the employee keeps their own 401(k) contributions and whatever employer money has vested under the plan's schedule; the rest forfeits to the plan. The employer's obligations are procedural: a timely statement of vested balance, the distribution options (leave it, roll it over, cash out with taxes and possible penalties), and the rollover-notice paperwork the plan administrator generates. Two cautions: forced cash-outs are limited to small balances under the plan's thresholds, and never advise — the line between explaining options and recommending one is where fiduciary problems start. Outstanding 401(k) loans deserve a specific mention in the exit meeting: they typically come due or convert to taxable distributions on a schedule the employee won't know until it's expensive.

Group life and disability coverage usually end at separation — with conversion or portability rights exercisable within roughly 31 days, a deadline that is invisible, irreversible, and litigated when an uninsurable former employee's family discovers it lapsed unnotified. Put the conversion notice in writing, dated. Assemble the whole exit packet in one pass: benefits end-dates and rights (this guide), the final paycheck on the state's deadline with any required PTO payout, the severance agreement where one is offered, and the state-specific separation notices several states require. Offboarding is a checklist precisely because every item is easy and every omission compounds — build it once, run it every time.