Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

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paramedic
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Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by paramedic » Sun Jul 01, 2018 1:40 pm

I work for a hospital system that was acquired by another hospital system.

Our old 403(b) is being discontinued. We're being told that we *have to* rollover the funds or otherwise obtain a full distribution from the 403(b). The new hospital system offers a 401(k), for which I am now enrolled.

I have $91,000 in this particular 403(b). These funds are all in the Vanguard Institutional Index Fund (VINIX).

We can do a rollover beginning tomorrow (there was a frozen period initially). The new 401(k) provider is happy to accept the rollover funds, and the new 401(k) provider offers the Vanguard Institutional Index Fund (VINIX). I'm being told that I will have to cash out my 403(b) VINIX, have a check sent to the new 401(k), and that they will then purchase VINIX with those funds.

Are there any timing considerations with regard to the rollover? I would rather not have any gains or losses based on market moves (I don't like to try to time the market), though this may be unavoidable. Are there separately any timing considerations with respect to the VINIX dividends?

ny_rn
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by ny_rn » Sun Jul 01, 2018 1:54 pm

I was in a similar situation earlier this year. I too work for a hospital system that was acquired by another hospital system.

My old 403(b) was with Valic. The new 403(b) is with TIAA. I essentially made an account with TIAA, selected my investments and they did the rest. All of the money from Valic was moved to TIAA and used to purchase my selected investment (Vanguard Total Stock Market Institutional Plus Shares).

Are you sure you have to cash out and have a check sent?

livesoft
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by livesoft » Sun Jul 01, 2018 2:02 pm

My spouse had a change of custodian and her VFIAX was all sold, the cash transferred, and then reinvested in VFIAX. So this is similar to the OP's situation.

I would say there is not much one can do unless one has a spare other $91K in a bond fund or cash
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paramedic
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by paramedic » Sun Jul 01, 2018 2:05 pm

ny_rn wrote:
Sun Jul 01, 2018 1:54 pm
I was in a similar situation earlier this year. I too work for a hospital system that was acquired by another hospital system.

My old 403(b) was with Valic. The new 403(b) is with TIAA. I essentially made an account with TIAA, selected my investments and they did the rest. All of the money from Valic was moved to TIAA and used to purchase my selected investment (Vanguard Total Stock Market Institutional Plus Shares).

Are you sure you have to cash out and have a check sent?
It appears so, though I will re-verify with Milliman (the provider of the old 403(b)). Though there were/are no apparent tax implications, it seems that you had to do a sale of your investments, a direct rollover of the resulting funds, and then a purchase of Vanguard Total Stock Market Institutional Plus Shares at the new provider, correct?

I know it shouldn't be a "big deal", but I cringe at the thought of losing out if the market has a 2% or 3% gain during the rollover time, and my last dividend amount was apparently $780 or so. Maybe I should be viewing a gain or loss during the rollover period as having relatively equal probability, thus assigning that less weight, and just be focusing on timing with respect to the dividend(s)?

tibbitts
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by tibbitts » Sun Jul 01, 2018 2:16 pm

paramedic wrote:
Sun Jul 01, 2018 1:40 pm
I work for a hospital system that was acquired by another hospital system.

Our old 403(b) is being discontinued. We're being told that we *have to* rollover the funds or otherwise obtain a full distribution from the 403(b). The new hospital system offers a 401(k), for which I am now enrolled.

I have $91,000 in this particular 403(b). These funds are all in the Vanguard Institutional Index Fund (VINIX).

We can do a rollover beginning tomorrow (there was a frozen period initially). The new 401(k) provider is happy to accept the rollover funds, and the new 401(k) provider offers the Vanguard Institutional Index Fund (VINIX). I'm being told that I will have to cash out my 403(b) VINIX, have a check sent to the new 401(k), and that they will then purchase VINIX with those funds.

Are there any timing considerations with regard to the rollover? I would rather not have any gains or losses based on market moves (I don't like to try to time the market), though this may be unavoidable. Are there separately any timing considerations with respect to the VINIX dividends?
I was in a similar situation and in theory if you have enough money in relatively stable investments (money market, short-term bonds) you can hedge with your investments in other deferred accounts accounts. You need enough in the other accounts to allow you to transfer only cash-to-cash investments.

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goingup
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by goingup » Sun Jul 01, 2018 2:23 pm

ny_rn wrote:
Sun Jul 01, 2018 1:54 pm
Are you sure you have to cash out and have a check sent?
I agree this is important to know. In my experience this type of transition has been seamless to me.

tibbitts
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by tibbitts » Sun Jul 01, 2018 2:29 pm

goingup wrote:
Sun Jul 01, 2018 2:23 pm
ny_rn wrote:
Sun Jul 01, 2018 1:54 pm
Are you sure you have to cash out and have a check sent?
I agree this is important to know. In my experience this type of transition has been seamless to me.
Even if "seamless" the various parts of the process tends to happen at unpredictable times, which is why you need to move to cash-like investments before moving the funds, and then move the funds to similar cash-like investments.

paramedic
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by paramedic » Sun Jul 01, 2018 2:43 pm

tibbitts wrote:
Sun Jul 01, 2018 2:29 pm
Even if "seamless" the various parts of the process tends to happen at unpredictable times, which is why you need to move to cash-like investments before moving the funds, and then move the funds to similar cash-like investments.
That is an excellent point. Thank you.

pkcrafter
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by pkcrafter » Sun Jul 01, 2018 3:23 pm

This seems odd to me. I'm surprised you cannot do a direct custodian to custodian transfer instead of a rollover. I'm not familiar with your particular situation, but normally when doing a rollover, tax is withheld and the check is sent in your name, then you have 60 days to deposit it into the new account. It is counted as a distribution and taxes are withheld. Hopefully it will be considered a transfer and the check will not be in your name and no taxes will be withheld. Just make sure that's the way it will work. If taxes are withheld, you must replace what was taken out.

Paul
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by MindBogler » Sun Jul 01, 2018 4:11 pm

pkcrafter wrote:
Sun Jul 01, 2018 3:23 pm
This seems odd to me. I'm surprised you cannot do a direct custodian to custodian transfer instead of a rollover. I'm not familiar with your particular situation, but normally when doing a rollover, tax is withheld and the check is sent in your name, then you have 60 days to deposit it into the new account. It is counted as a distribution and taxes are withheld. Hopefully it will be considered a transfer and the check will not be in your name and no taxes will be withheld. Just make sure that's the way it will work. If taxes are withheld, you must replace what was taken out.

Paul
I recently had a similar situation with a Fidelity 401K after changing jobs. They would only do in-kind transfers to a Fidelity IRA. Since I didn't want to stay with Fidelity, I had to liquidate all investments into cash/sweep and then initate a rollover. They also would not mail the check to the new institution. They sent me a check which was written out to "Vanguard, FBO Mindbogler." I sent this check to Vanguard with the account number for the rollover IRA written on it. They did not withhold any taxes.

paramedic
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by paramedic » Sun Jul 01, 2018 4:15 pm

pkcrafter wrote:
Sun Jul 01, 2018 3:23 pm
This seems odd to me. I'm surprised you cannot do a direct custodian to custodian transfer instead of a rollover. I'm not familiar with your particular situation, but normally when doing a rollover, tax is withheld and the check is sent in your name, then you have 60 days to deposit it into the new account. It is counted as a distribution and taxes are withheld. Hopefully it will be considered a transfer and the check will not be in your name and no taxes will be withheld. Just make sure that's the way it will work. If taxes are withheld, you must replace what was taken out.

Paul
Paul, my terminology is likely imprecise. As far as I know, it is a direct transfer from the standpoint that the 403(b) company would be sending a check directly to the 401(k) company with no taxes withheld. That said, my preference would be to directly transfer the actual VINIX holdings, rather than cashing out and transferring the VINIX funds, but this seems (?) to not be possible. I'll re-confirm, however.

pkcrafter
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by pkcrafter » Sun Jul 01, 2018 4:39 pm

paramedic wrote:
Sun Jul 01, 2018 4:15 pm
pkcrafter wrote:
Sun Jul 01, 2018 3:23 pm
This seems odd to me. I'm surprised you cannot do a direct custodian to custodian transfer instead of a rollover. I'm not familiar with your particular situation, but normally when doing a rollover, tax is withheld and the check is sent in your name, then you have 60 days to deposit it into the new account. It is counted as a distribution and taxes are withheld. Hopefully it will be considered a transfer and the check will not be in your name and no taxes will be withheld. Just make sure that's the way it will work. If taxes are withheld, you must replace what was taken out.

Paul
Paul, my terminology is likely imprecise. As far as I know, it is a direct transfer from the standpoint that the 403(b) company would be sending a check directly to the 401(k) company with no taxes withheld. That said, my preference would be to directly transfer the actual VINIX holdings, rather than cashing out and transferring the VINIX funds, but this seems (?) to not be possible. I'll re-confirm, however.
paramedic, as MindBogler said, ideally you would want an "in-kind" transfer. That would be direct transfer of VINIX. By the way, if you have total stock market in the new plan it would be a little better option.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

tibbitts
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by tibbitts » Sun Jul 01, 2018 5:43 pm

I once did a transfer of shared between taxable accounts (different ownership) within Vanguard. They still couldn't tell me when the transfer would occur - not even down to the week when it would occur. You can't do inter-owner transfers (which aren't taxable events) online. I'd thought they could (and they'd told me so), so I didn't move to cash first - basically I did an "in-kind" transfer within Vanguard. So I didn't move to cash first and that was a mistake. I didn't have enough funds to do that entirely but I could have come close. I lost a couple of thousand of dollars as a result.

paramedic
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by paramedic » Mon Jul 02, 2018 2:08 pm

I just got off the phone with Milliman. They don't allow any kind of "in-kind" transfers out of the 403(b), unfortunately. They also confirmed that all assets would have to be liquidated by August 31.

I am converting everything into cash and having them send a check to the new 401(k) provider.

Thanks for the help, everyone!

paramedic
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Re: Timing of rollover of Vanguard Institutional Index Fund (VINIX) in 403(b)?

Post by paramedic » Thu Jul 12, 2018 3:02 pm

Update: The Vanguard Institutional Index shares sold on 7/2/2018 at a price of $248.52 per share, and they were purchased in the new 401(k) on 7/11/2018 at a price of $252.99 per share. This 9 day gap (as fast as the transfer would go) included the July 4th holiday.

Not too bad overall.

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