WHAT IS Unemployment Compensation Amendment of 1992
Unemployment Compensation Amendment of 1992 is a law in the United States that allows a terminated employee to take employer-sponsored retirement savings and place them into a retirement plan of their choice.
BREAKING DOWN Unemployment Compensation Amendment of 1992
Unemployment Compensation Amendment of 1992 to the Unemployment Compensation Act allows an ex-employee to keep the money they saved and invested while working for their employer. This applies to either defined contribution pension plans or defined benefit pension plans. Because of this, employees do not have to worry about losing money being matched by their employer toward their investment plan upon being terminated. The Act gives the option upon termination of directly transferring the funds into an individual retirement account, IRA, or qualified pension plan of the individual's choice. If the individual would like to receive the distribution directly, there is a 20 percent withholding penalty paid to the Internal Revenue Service, IRS.
Involuntary termination of employment occurs when an employer lays off or dismisses or fires an employee. A layoff or organization downsize is a decision taken by a company to reduce the number of its staff in order to reduce its cost of operations, restructure its organization, or because the employee’s skill set is no longer needed. Employees are usually laid off due to no fault of their own, unlike workers who are fired.
In most cases where an employee who has worked with a company for at least three months has their employment involuntarily terminated, the employer may provide a notice of termination and termination pay or severance pay. In the U.S., the only notifications legally required to be included in a notice of termination are related to the Consolidated Omnibus Benefits Reconciliation Act, COBRA, and the Worker Adjustment and Retraining Notification Act, WARN. A reason for termination need not be stated, though it tends to be best practice if an employee has been fired for cause.
Under the Fair Labor Standards Act, FLSA, a company is not mandated to provide severance packages. A company that offers severance does so following an agreement made privately with the employee. Also, employers are not required by federal law to give the terminated employee their final paycheck immediately. State laws may operate differently in this regard and may mandate the employer to not only immediately provide the affected employee with the final paycheck, but to also to include accrued and unused vacation days.
A worker who is unemployed through no fault of their own may be eligible to receive unemployed benefits. Each state administers separate unemployment insurance payments program to offer temporary financial assistance to people who are unemployed and looking for a job. The United States Department of Labor provides more information on benefits to which unemployed workers may be entitled.