I see on the severance package that there is a 50% “Severance allowance” deducted from the six month pay severance package. What is that? Can’t get a straight answer anywhere. Is it a tax, so we might get some back when we file income tax? I’m befuddled.
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If you do the Math as I suggested in @1cpm, you may find out that it’s not worth subscribing to MTP and you may be better off getting health insurance via ACA.
Example:
Severance Amount: $50,000
Tax: 20%
Savings in health insurance premium with AT&T Medical relative to ACA: $200 per month
Net Amount without MTP: 50,000 - 10,000 tax = $40,000
Net Amount with MTP: 25,000 - 10,000 tax = $15,000
Severance loss: 40,000 - 15,000 = 25,000
Months to recover loss: 25,000 / 200 = 125 months = 10.4 years
AT&T only provides retiree health insurance till age 65.
The AT&T Medicare subsidy is only $2700 per year and it is only funded till 2023 for those that retire by the end of 2020. The company is not offering the subsidy for those retiring in 2021 and beyond.
Since the OP is MTP eligible, his severance loss amount (3 month salary) will far exceed $2700*3 = $8100.
Hope that helps!
What duration is the MTP? I am not yet 60 years old but meet Rule of 75.
Consider income tax in the calculation. Severance payouts, like unemployment insurance, is considered taxable income.
MTP works if you're Medicare eligible. Part A is free, the subsidy basically pays for Part B plus a little for the deductible. You still have to purchase medigap policy out of pocket plus a Part D (d–gs) if that's important to you..... Or use the subsidy to buy an Advantage Plan C. Like they said, look up the policy costs and do the math. Everyone's situation is different. If you are younger (not medicare eligible) and you go through ACA; then it's less likely the MTP plan works for you.
I suggest you do the Math before accepting MTP.
Please calculate how much you will pay for monthly health insurance premium with MTP versus the market premium rates (for instance, with ACA).
Divide the Severance Loss (i.e., 3 months salary) by the monthly premium savings, if any, to determine the number of months it will take to recover the severance loss caused by accepting MTP.
Health insurance is the only benefit of any significance with MTP.
If you selected MTP your severance essentially drops to 3 months salary but you are taxed on 6 months of salary. I suggest you read the myriad paperwork you were provided. This was reviewed during the online FAQ workshop meetings
I would like to know too. Might have something to do with retiring with benefits or not.