What to Do in the First 90 Days After a Tech Layoff, Equity Edition
A layoff starts several clocks at once: typically 90 days to exercise vested stock options, 60 days to pick health insurance, and a short window to review the separation agreement. Work them in order: agreement, options, health coverage, cash.
The expensive mistakes are irreversible: options that expire, a health-insurance window that closes, a 401(k) cashed out in a panic. None can be fixed in month four.
Most equity holders will live through at least one layoff. The first 90 days decide how much of your equity you keep and how much cash you burn. Figures here are as of November 12, 2026, verified against IRS publications, the Department of Labor, and the KFF 2026 Employer Health Benefits Survey.
Week 1: read the separation agreement before you sign anything
Do not sign the separation agreement on the spot. It trades a release of claims for severance, and once signed the terms are very hard to change. Workers 40 and older typically get at least 21 days to consider it and 7 days to revoke after signing (45 days to consider for group terminations). Even with no deadline stated, take a few days and read every line.
Five things to check first:
- Your last day. Vesting stops then — if the agreement keeps you employed through a vesting date, that grant is yours; otherwise it's gone.
- Whether severance extends vesting or the exercise window. Some agreements accelerate a grant or extend the window — if yours doesn't, ask; it's the term most worth negotiating.
- When benefits end. Coverage often runs to the end of the month of your last day — the exact end date starts your 60-day insurance clock.
- Non-compete, non-solicitation, and non-disparagement clauses. Know what they restrict before you interview — and whether they hold up in your state.
- WARN Act notice. For a mass layoff or plant closing, employers with 100+ employees must generally give 60 days' written notice. If yours was a large reduction with no notice, ask an employment attorney whether back pay is owed.
Your equity: the 90-day clock is the one that bites
Unvested RSUs are forfeited on your last day. Any tranche that hasn't vested disappears, and severance doesn't extend vesting unless the agreement says so. Vested RSU shares are already yours; decide whether to sell or hold them like any other holding — the tax was settled at vest (see our guide on RSU tax withholding).
Vested options usually expire 90 days after your last day. The window is set by your plan document — it can run from 30 days to 10 years — but 90 days is standard, because tax law drives it: under IRC 422, incentive stock options (ISOs) keep their favorable treatment only if exercised within three months of leaving. After that, an exercise is taxed like a non-qualified option (NSO), with the spread as ordinary income. A longer window preserves your right to exercise, not the ISO treatment. (Disability extends it to one year.)
Exercising costs cash exactly when your income stops: the strike price for every share, plus possibly alternative minimum tax on the ISO spread (2026 AMT exemption: $90,100 single / $140,200 married filing jointly). More than 70% of vested options go unexercised when employees leave, per Mercer.
An illustrative example
The numbers below are a simplified illustration, not anyone's real situation.
Say you hold 1,000 vested ISOs at a $10 strike, stock worth $40:
| Amount | |
|---|---|
| Cost to exercise (1,000 × $10) | $10,000 |
| Paper value at exercise (1,000 × $40) | $40,000 |
| Spread counted for AMT | $30,000 |
| If you let them expire | $0 — the $30,000 of paper value is gone |
| Choice | When it makes sense | Watch out for |
|---|---|---|
| Exercise now | Deep in the money, and you can afford the strike price plus any AMT | Cash out of pocket; if the stock falls, you've paid tax on a shrinking gain |
| Exercise later (extended window only) | Your plan allows years and you want to defer the cash cost | ISOs convert to NSOs after 3 months — the spread is ordinary income at exercise |
| Let them expire | Options are underwater, or the cost exceeds what the shares are worth to you | Make it a decision, not an accident — check the plan's actual deadline |
Many companies offer a cashless exercise, which removes the out-of-pocket problem. If the company is private, check for a tender offer or secondary market before paying to exercise shares you can't sell.
Health insurance: COBRA vs. the marketplace — decide within 60 days
COBRA lets you keep your exact employer plan for up to 18 months, but you pay the full premium plus a 2% fee — your share plus your employer's. Per the KFF 2026 Employer Health Benefits Survey, that's about $833 a month for one person and $2,406 a month for a family. The election window is 60 days from the later of the coverage loss or the notice, and coverage is retroactive to the loss date.
The ACA marketplace gives you a 60-day Special Enrollment Period, before or after coverage ends. Marketplace coverage is not retroactive; it starts the first of the month after you enroll, so waiting until day 59 can leave a gap. Premium tax credits apply to households earning 100%–400% of the federal poverty level — roughly $15,650–$62,600 single, $32,150–$128,600 for a family of four in 2026. The enhanced subsidies that removed the 400% cap expired after 2025, so above that line there is no credit for 2026.
| COBRA | ACA marketplace | |
|---|---|---|
| Window | 60 days to elect | 60 days to enroll |
| Typical cost (2026) | ~$833/mo single; ~$2,406/mo family | Varies with income; often far cheaper |
| Coverage start | Retroactive to loss date | First of the month after you enroll |
| Doctors and network | Same plan, same network | New plan — check your doctors |
| Duration | Up to 18 months | As long as you keep paying |
The trap: once you elect COBRA, voluntarily dropping it does not reopen the marketplace window. Compare both options during the first 60 days; don't elect COBRA by default.
Cash: severance, unemployment, and the runway
Severance is taxed as ordinary income. The IRS treats it as supplemental wages, so employers typically withhold a flat 22% federal income tax (37% above $1 million in supplemental wages for the year), plus 6.2% Social Security up to the $184,500 wage base in 2026 and 1.45% Medicare. The 22% is withholding, not your final rate — if you spend part of the year unemployed, your actual rate is often lower and the excess comes back as a refund. A lump sum lands in one tax year and can push you into a higher bracket; installments across two years can soften that.
File for unemployment immediately, even if severance is coming. Benefits are state-run and vary widely: California pays at most $450 a week for up to 26 weeks; Washington tops the range at $1,208 a week; Mississippi is lowest at $235. Severance can delay or reduce benefits in many states — some treat a lump sum as wages for a number of weeks, others cut the weekly benefit dollar-for-dollar — but a few states don't count severance at all. File anyway and report the severance as the state asks.
Do the runway math once, on paper: severance (after tax) plus unemployment plus your emergency fund, divided by your monthly burn rate, is the months you can go without income. If it's under six, cut discretionary spending now, while the severance check is still in the bank — not in month five. A net-worth dashboard showing cash, runway, and monthly spend turns this into a five-minute check. [AFFILIATE LINK: Empower — free net-worth dashboard]
Your 401(k) and the accounts you forget
Your 401(k) doesn't disappear when you leave — but you can't contribute anymore:
| Option | Tax impact | Best for |
|---|---|---|
| Leave it with the old employer | None — tax-deferred growth continues | Balance of $7,000+ (the plan can't force you out) |
| Roll to an IRA | None, if a direct rollover | More investment choices |
| Roll to a new employer's 401(k) | None, if a direct rollover | Consolidating later |
| Cash it out | Ordinary income + 10% penalty if under 59½ | Almost never — the most expensive way to get cash |
Two traps. If you borrowed from your 401(k), the loan usually becomes due after separation — but a qualified plan loan offset can be rolled over until your tax filing deadline for the year of the offset (April 15, 2027 for a 2026 offset; October 15 with an extension). Miss it and the unpaid balance is taxed as income, plus the 10% penalty under 59½. If your vested balance is under $7,000, the plan may automatically roll it into an IRA or cash it out.
The accounts people forget: your HSA stays yours forever — keep it invested and use it for medical costs, COBRA premiums included. Your health FSA ends at termination — spend the balance before your last day; unused money is generally forfeited (some plans let you continue it through COBRA). ESPP participation stops — deducted contributions are usually used to buy shares at the next purchase date or refunded.
The 90-day checklist
| When | Do this |
|---|---|
| Days 1–7 | Read the agreement — don't sign on the spot. Gather plan documents: grants, RSU schedule, loan and FSA balances, coverage end date. |
| Days 8–30 | Decide on options — exercise, sell RSUs, or let expire — with the cash and AMT math done. File for unemployment. Compare COBRA vs marketplace; enroll in one. Spend down the FSA. |
| Days 31–60 | Sign the agreement within its deadline. Decide the 401(k): leave it or roll over. Calendar the loan rollover deadline. Recompute your runway. |
| Days 61–90 | Exercise vested options before the window closes — or confirm in writing you've chosen not to. Confirm coverage is active. Adjust estimated taxes for the lower-income year. |
Layoff equity FAQ
Do unvested RSUs keep vesting while I receive severance?
Usually no. Vesting stops on your last day of employment, and severance is generally not treated as employment for vesting purposes — unvested RSUs are forfeited. A separation agreement can change this, so check whether yours extends the vesting date or accelerates any grants before you sign.
How long do I have to exercise stock options after a layoff?
Most plans give you 90 days from your last day to exercise vested options, after which they expire worthless. For ISOs, exercising within three months preserves ISO tax treatment under IRC 422; after that, any exercise is taxed like an NSO. Some companies offer longer windows, but the ISO treatment still ends at three months. Your plan document controls — read it, don't assume 90 days.
Is COBRA or an ACA marketplace plan cheaper after a layoff?
Usually the marketplace, if you qualify for a premium tax credit. COBRA averages about $833 a month for one person and $2,406 for a family in 2026, since you pay the full premium plus a 2% fee. A subsidized marketplace plan can cost far less, but the enhanced subsidies expired after 2025 and the 400%-of-poverty-line cliff is back for 2026. Compare both inside the 60-day window — and note that once you elect COBRA, voluntarily dropping it does not reopen the marketplace window.
Does severance affect unemployment benefits?
It depends on your state. Many states treat a lump-sum severance as wages for a period — dividing the amount by your weekly pay to set a waiting period — or reduce your weekly benefit dollar-for-dollar during the severance period. A few states don't count severance at all. File for unemployment anyway, report the severance exactly as the state asks, and check your state agency's rules before choosing lump sum vs installments.
The bottom line
A layoff is a deadline problem disguised as an emotional one: the feelings take months, the deadlines take 90 days. Read the agreement before you sign, decide on your options before the window closes, pick health coverage inside 60 days, and leave the 401(k) alone. Get those four right and the rest is just work.