Thread regarding DST Systems layoffs

401K Contribution and Severance Pay

Took this 401k post from a different thread may be useful if you have funds/money:

Just FYI to previous post, 401(k) contribution will not be deducted from severance pay. It’s considered supplemental pay/bonus, and retirement account contributions are not taken out. It also taxed at a higher rate like a bonus—I think around 40%.

Response to:

May be too late, but if you think you are on the list, you might want to lower your 401k contribution. Not sure exactly how severance would work, but if it’s a lump sum, you might get a hefty chunk taken out as a contribution?

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Post ID: @OP+TN0krJG

7 replies (most recent on top)

I’m pretty sure the severance plan detailed in late March says payment will be one lump sum. Did not say anything about multiple payments as an option.

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Post ID: @2vec+TN0krJG

I can’t answer for 2017, but in previous layoffs, DST let you take the severance payment in installments. I assume this was available to people that who were concerned about managing a lump sum payout, But it also gave you some tax planning tools.

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Post ID: @1qsp+TN0krJG

Why do you think people will have an option on how severance will be paid out? Is this an option DST or SS&C has provided to terminated employees in the recent past? I ask because BFDS associates who were laid off in 2017 had no option, it was paid out as a lump sum.

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Post ID: @1ufq+TN0krJG

Good 401K info @lqp

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Post ID: @xvb+TN0krJG

The 401-k contributions won’t impact your taxes. What will impact your taxes is the lump sum amount you may be due from severance pay, vacation pay, and maybe even the payment made to help with medical insurance. Since the layoffs, if they happen, will be mid year, you will easily be bumped into higher tax brackets. Just to use easy numbers, say you usually earn $100,000. You have been at DST for 25 years, and are entitled to a years severance pay. You would end up receiving a severance payment of $100,000, throw in $10,000 vacation, and maybe $3,000 in the medical assistance payment. All of a sudden your 2018 Income will be $160,000+ ($50,000 salary for the first half of the year included). This will push you into tax brackets you haven’t seen before.

I think you will have the option of receiving your severance money all at once, or spread over payments. If the taxes are a concern, ask DST to make two income severance payments to you - one at the time of termination and one on 1-1-19.

The tax man.

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Post ID: @lqp+TN0krJG

Good info. Thank you

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Post ID: @twa+TN0krJG

ya, we know already.

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Post ID: @zyk+TN0krJG

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