Laid Off on H-1B: The Money Checklist for Final Pay, 401(k) Loans, RSUs, HSA and FSA

Your H-1B grace period of up to 60 days and your money deadlines run side by side, and a missed 401(k) loan offset, FSA balance or option window costs real money.

If you are laid off on H-1B, your 401(k) is not forfeited because of your visa. Your own contributions and any vested employer match stay yours, and you can leave them in the plan, roll them into an IRA or a new employer's plan, or cash out (taxable, and usually with a 10% additional tax before age 59 1/2). The money actually at risk sits elsewhere: an unpaid 401(k) loan, unvested RSUs, a health FSA balance and stock-option exercise windows each have their own deadline, and all of them run while your grace period runs.

Status as of 2026-11-01. The discretionary H-1B grace period of up to 60 days is in effect. DHS has proposed eliminating it for H-1B and other workers (RIN 1615-AD22); comments close 2026-11-10 (check the Federal Register docket for the outcome after 2026-11-10). A proposal is not law, the current 60 days applies, and severance does not add days to it. No 30-day or 180-day H-1B grace period exists or has been proposed.

For scale, Challenger, Gray & Christmas counted 43,281 announced US job cuts in September 2026 and 165,925 tech cuts year to date, up 54% (September 2026 report).

Laid off on H-1B: what happens to your 401(k), equity and benefits

Your vested 401(k) balance, vested shares and HSA stay yours after an H-1B layoff. What you can lose is anything tied to still being employed: unvested RSUs and match, the health FSA, employer health coverage and an unpaid 401(k) loan. Each has a deadline set by the plan or by tax law, not by USCIS, so track them separately.

What you keep and what you can lose (as of 2026-11)

The two clocks: your grace period and your money deadlines

USCIS guidance said the grace period "starts the day after termination of employment," which "is typically determined based on the last day for which a salary or wage is paid" (USCIS archived guidance, last reviewed 01/24/2025 and now marked out of date). The regulation itself allows the period "for up to 60 consecutive days or until the end of the authorized validity period, whichever is shorter," once per validity period, and you may not work during it (8 CFR 214.1(l)(2)). If the proposal were finalized as written, the only window left would be the 214.1(l)(1) window of up to 10 days after the petition's validity period ends, which does not run from a layoff.

Severance paid after your termination date does not extend those 60 days. A paid notice period in which you are still an employee is different, because your employment may not have ended yet. Get the date in writing and plan from the earliest date that could count. Our guide to when the grace period clock starts with severance covers the paperwork, and the 60-day grace period guide covers your status options.

Common misconception: "I have 60 days to roll over my 401(k), the same 60 days as my grace period." Correction: The clocks are unrelated. The IRS 60-day rollover rule runs from the day you receive a distribution (IRS rollovers page). A loan offset caused by leaving your job gets until your tax return due date, including extensions. A direct rollover has no 60-day clock. None of them depends on your visa.

Days 0 to 7: get the facts in writing

Collect documents before your system access ends.

1. Request a separation letter from HR stating your termination date, your last day worked, and whether the company has told USCIS your H-1B employment ended.
2. Ask HR in writing about return transportation. An employer that dismisses you before your authorized admission ends "will be liable for the reasonable costs of return transportation of the alien abroad" (8 CFR 214.2(h)(4)(iii)(E)).
3. Check the final paycheck and PTO payout against your state labor department's rules, because federal law does not require immediate final pay (DOL). Watch for deductions too: 20 CFR 655.731(c)(10)(ii) bars an employer from recovering any part of the additional petition filing fee under INA 214(c) from you.
4. Download pay stubs, the 401(k) loan statement, equity grant agreements and vesting schedules, and your FSA and HSA details from the benefits portals.
5. Read the severance agreement for its signing deadline, RSU vesting terms, any COBRA subsidy and the release. An employment attorney reads the release; an immigration attorney reads the dates.
6. Book a licensed immigration attorney to pick a path: a new employer's petition, a change of status, or departure. That choice decides where your money should go.

Days 8 to 30: health coverage, the 401(k) loan and equity

How long do you have to elect COBRA?

You have 60 days to elect, counted from when coverage ends or when the election notice is provided, whichever is later, then 45 days to make the first payment (DOL COBRA FAQs). COBRA covers private employers with 20 or more employees, and once you elect and pay, coverage is retroactive to the day you lost your plan. IRS Publication 969 lists COBRA among the premiums an HSA can pay tax-free. If you compare it with a marketplace plan, the premium tax credit is scheduled by statute to be zero from 2027 for people who are not "eligible aliens", which state summaries say includes H-1B, H-4 and F-1 holders; Treasury's rules are proposed (comments due 2026-11-30; see what ends for H-1B and F-1 households in 2027).

Can you still spend your FSA after a layoff?

Often more than you think. Publication 969 says you "must be able to receive the maximum amount of reimbursement (the amount you have elected to contribute for the year) at any time during the coverage period, regardless of the amount you have actually contributed." Unused amounts are forfeited unless your plan has a carryover or grace period, so book appointments and refill prescriptions before coverage ends, then file claims within your plan's run-out window. A dependent care FSA works differently; check your plan.

What happens to my 401(k) loan if I'm laid off on H-1B?

Your plan decides whether you can keep repaying after you leave; if you do not repay, it can offset the unpaid balance against your account. When the offset is "due to plan termination or severance from employment," the IRS gives you "until the due date, including extensions, for filing the Federal income tax return for the taxable year in which the offset occurs" to roll it over (IRS loan FAQs), by depositing an equal amount of your own cash into an IRA or new plan. Anything not rolled over is taxed, and the 10% additional tax can apply before 59 1/2 (IRS Topic 558).

If you might leave the US, open the IRA while you still live here; some custodians may not open accounts for people living abroad.

Can a mass layoff vest your employer match?

Possibly. The IRS says "the presumption of a partial termination happens when the turnover rate is 20% or greater," and affected participants "must be fully vested" (IRS partial termination page). The employer can rebut it, so after a large layoff, ask the plan administrator in writing whether a partial termination applies.

Do you lose unvested RSUs when laid off?

Usually. Equity plans typically cancel unvested RSUs on your termination date unless your grant or severance agreement continues or accelerates vesting. A vest scheduled days after your termination date is generally gone. Vested shares are yours whatever your status; our equity compensation guide for visa holders covers the tax side.

Stock options and ESPP

Your grant agreement sets how long you have to exercise vested options. Separately, incentive stock option treatment requires employment until "the day 3 months before the date of such exercise" (26 USC 422(a)(2)); a later exercise is taxed as a nonstatutory option, and an ISO exercise can trigger alternative minimum tax. For an ESPP, the plan document says whether unused contributions are refunded.

Days 31 to 60: move the money to match your plan

If a new employer files for you

• Roll over directly. A direct rollover into the new plan or an IRA has no withholding.
• Watch the deferral limit. The 2026 limit is $24,500, and with unrelated employers the IRS says "it is up to you to monitor your deferrals" (IRS contribution limits).
• Claim excess Social Security. The 2026 wage base is $184,500 (maximum employee tax $11,439). A new employer withholds from the first dollar, and the IRS lets you claim any excess from two employers as a credit (Topic 608).
• Restart your HSA. With new high-deductible coverage, limits are $4,400 self-only and $8,750 family for 2026 (Rev. Proc. 2025-19), and $4,500 and $9,000 for 2027 (Rev. Proc. 2026-24). Partial-year eligibility can shrink your limit; Publication 969 explains the last-month rule.

If you change status (H-4, F-1 or B-2)

You will likely have no paycheck for a while, so the risk is raiding retirement money to cover the gap. Leaving the 401(k) alone keeps every option open. Your HSA can still pay qualified medical expenses, including COBRA premiums, and Publication 969 allows tax-free reimbursement of qualified expenses you incurred after you set up the HSA, so saved receipts can be cheaper cash than a 401(k) withdrawal.

If you leave the United States

• 401(k): leave it in the plan or roll it to an IRA before you go; our guide to 401(k) withdrawal rules for visa holders leaving the US compares the paths, including treaty-rate withholding.
• HSA: it stays yours, but non-medical withdrawals are taxable "and may be subject to an additional 20% tax" (Pub 969).
• Shares: ask your broker whether it keeps accounts for non-US residents before you change your address.
• Sending money home: the 1% remittance excise tax, in effect since 2026-01-01, applies to transfers funded with cash, a money order or a cashier's check; bank-account and card-funded transfers fall outside the IRS description (Form 720 instructions).
• Taxes: the year you leave can be a dual-status year (IRS Publication 519); use a tax professional who handles nonresident returns.

Should you cash out your 401(k) after an H-1B layoff?

It is usually the most expensive way to raise cash. If you are a US tax resident, a distribution paid to you is "subject to mandatory withholding of 20%, even if you intend to roll it over later" (IRS rollovers page); as a nonresident alien, withholding is generally 30% or a treaty rate. Either way it is taxable income, and the 10% additional tax applies before 59 1/2 unless an exception fits. Before you request one, ask yourself:

• Have I priced severance, savings and HSA reimbursements first?
• Do I know my 2026 residency status, which sets my withholding and final tax?
• Has a tax professional run the numbers, including any treaty rate?

Worked example: last day of employment Friday 2026-10-30

One scenario; your own letters, plan documents and I-94 govern.

The COBRA and ISO deadlines fall after day 60, so those decisions follow you, possibly abroad, where a US plan may cover little.

Common mistakes

• Counting severance as extra grace-period days. Plan from your termination date.
• Requesting a 401(k) check in a panic. Withholding (20%, or generally 30% as a nonresident) comes off up front, and the 10% additional tax likely applies.
• Forgetting the FSA. Uniform coverage may let you spend more than you paid in; the rest is forfeited.
• Missing an option window set by the grant, or the 3-month ISO line.
• Signing a severance agreement unreviewed when it claws back petition costs or sets dates that affect your status.

Frequently asked questions

What happens to my 401(k) loan if I'm laid off on H-1B?

If you do not repay it after you leave, your plan can offset the balance as a distribution. An offset due to leaving your job can be rolled into an IRA or plan until your tax return due date, including extensions: April 15, 2027, for a 2026 offset, or later with a valid extension. Otherwise it is taxed, and the 10% additional tax can apply before 59 1/2.

Do I lose unvested RSUs when laid off?

Usually. Equity plans typically cancel unvested RSUs on your termination date unless your grant or severance agreement says otherwise. Vested shares are yours regardless of visa status, and they were generally taxed as wages when they vested.

Can I keep my HSA if I leave the US?

Yes. Publication 969 says an HSA stays with you if you change employers or leave the work force. New contributions need qualifying high-deductible coverage, and non-medical withdrawals are taxable with a possible additional 20% tax. Ask your custodian about keeping the account from abroad, and a tax professional how withdrawals are taxed once you are a nonresident.

Should I cash out my 401(k) after an H-1B layoff?

It is usually the most expensive option: taxable income, usually a 10% additional tax before 59 1/2, and 20% mandatory withholding as a US tax resident, or generally 30% or a treaty rate as a nonresident alien. Leaving the money in the plan or making a direct rollover avoids the 10% additional tax.

Is severance taxed differently for visa holders?

No. Publication 525 says "Severance payments are wages subject to social security and Medicare taxes," and the F-1 student FICA exemption does not apply in H-1B status. Your residency status for the year (resident, nonresident or dual-status) can change your final tax, so have a tax professional check it.

Sources

• USCIS, Options for Nonimmigrant Workers Following Termination of Employment
• Federal Register, Eliminating the Discretionary 60-Day Grace Period (proposed)
• 8 CFR 214.1, 8 CFR 214.2, 20 CFR 655.731, 26 USC 422
• DOL, COBRA FAQs for workers, Last paycheck, Vacation leave
• IRS, Plan loan FAQs, Rollovers, Partial termination, Topic 558, Topic 608
• IRS, Publication 969, Publication 525, Publication 519, Rev. Proc. 2025-19, Rev. Proc. 2026-24, Form 720 instructions
• Challenger, Gray & Christmas, September 2026 job cuts report

How we checked this: we read the USCIS, DOL and IRS pages, the regulations and statute, the Federal Register proposal and the Challenger report listed above on 2026-11-01 and 2026-11-02.

This is general information, not legal or tax advice; your own separation letter, plan documents, I-797 and I-94 govern, and an immigration attorney and a tax professional should review your situation.

If you are using the grace period to land a new sponsored role, F1Jobs helps international professionals run a focused search for employers that file H-1B petitions.