How does changing jobs work?

July 29, 2005 12:00 AM

I'm probably going to be taking a new job in the next couple of months. I'm currently at my first "real" job, so i have some questions for those of you who have done this before.

1.) I have some stock awards and stock options that are vested, but not exercised. Do I need to exercise these and move them to a personal account? They're fairly worthless at the moment, so exercising them won't result in much tax liability.

2.) If I have accrued vacation time, do they have to reimburse me for it, or continue covering my health insurance for that many days after my last day at work? Is this something to look up in some giant HR rule book at work? I'm in Washington state if there are state-by-state regulations for this sort of thing.

3.) How do you transfer a 401(k)?

If you have any other thoughts or advice that might be helpful, that would be great! I'm posting anonymously because my current work doesn't yet know that I'm looking at other options. Thanks!

posted by anonymous to work & money (7 comments total)

2. It probably varies by state, but I got reimbursed for unused vacation time when I left my last job.

3. Contact the company that is holding the 401k (i.e. Fidelity, or someone like that) and ask them what the procedure is to roll it into a new account. You may have some time that they'll hold the account for you. If you're above a certain amount (for me it was $6000), they'll let you keep the account indefinitely. The key here is to make sure they never write YOU a check for the money, because that will count as you withdrawing money from the 401k and incur the 10% penalty, plus there might be income tax implications.

Other advice: Make sure to tell potential employers that they cannot contact your current employer, because they don't know you're shopping around. Oh, and good luck! :)
posted by knave at 12:36 AM on July 29, 2005

1. If the stock awards and options are vested, they are yours forever. After you give your two weeks notice, speak with HR about it, of course. As long as they give you the all-clear, you can hang on to them until they are worth something.

2(a). I doubt that they have to reimburse you for unused vacation time. If you have this new job in the bag, just use it up. If you are planning to find this new job soon, you'll need the days for interviews and such.

2(b). As for health insurance, they won't pay for you after you leave work. However, under COBRA, a federal law, they have to allow you to continue to pay for coverage on their policy. This is useful because many jobs don't start providing health insurance for 3 months after you begin work. (Google COBRA, it's everywhere).

3. You will probably want to "roll over" your 401(k) into the one offered by your new company, which will help you out with that. If your new job doesn't have one, you can find a financial advisor (like at Smith Barney) to assist you.
posted by MrZero at 6:58 AM on July 29, 2005

I work in Washington state, and I know that my employer does not pay for unused vacation, but many employers do it even though they don't have to. You should look at your employee handbook or ask someone in HR to find out your company's policy.
posted by croutonsupafreak at 7:36 AM on July 29, 2005

MrZero: "1. If the stock awards and options are vested, they are yours forever. After you give your two weeks notice, speak with HR about it, of course. As long as they give you the all-clear, you can hang on to them until they are worth something."

This is not necessarily true, and it varies from state-to-state and employer-to-employer. I'd say that at the majority of employers, you will have a window, probably a couple months or so, after your last day of employment, during which you can still exercise your shares. (Also, are they "fairly worthless", or "actually worthless"? If your strike price is over the current market price, let them go. It might hurt, but if you spent that same amount of money on market shares, you'd get more.)

The exact answer to all of these questions varies a lot, so you really should either check your company's employee handbook or talk with someone in HR about them. Unless it's fly-by-night or a recent startup, they will certainly have dealt with people leaving the company before. HR should almost certainly have copies of the handbook available, since it usually contains information on ethics, benefits, legal mumbo-jumbo, etc.
posted by Plutor at 8:26 AM on July 29, 2005

I believe it makes more financial sense to roll the 401(k) into a personal IRA account. The various fees associated with 401(k)s can be very high- far far higher than an IRA. There are often 'hidden' fees with 401(k)s that aren't clearly disclosed. Also, the investment choices with the new employer's 401(k) might be limited.

Any mutual fund company will help you with the roll over process. I recommend Vanguard.
posted by sgarst at 9:07 AM on July 29, 2005

1) Any stock you own, you own. Options may go away after a specified amount of time after you leave (it has been 90 days for me in the past). If your options are "fairly worthless", why invest the money to exercise them? Is your (soon to be ex-)company the best place for you to invest your money? (Maybe it is, particularly if you got those options really cheaply and you expect the company to do well, even without you) Exercising and immediately selling makes sense if they're above water enough to make a profit worth the paperwork.

2) If you happen to work in California, your employer is legally obligated to pay you for vacation time (even if your employer is headquartered elsewhere, despite what your employer may think).

3) sgarst: Some rollover IRAs also have hidden fees. I just got charged an infuriating "account inactivity" fee on one of mine because I was just letting my investments sit there instead of paying commissions on trades.
posted by aneel at 9:50 AM on July 29, 2005

2(b). As for health insurance, they won't pay for you after you leave work. However, under COBRA, a federal law, they have to allow you to continue to pay for coverage on their policy. This is useful because many jobs don't start providing health insurance for 3 months after you begin work. (Google COBRA, it's everywhere).

And you need to do it. Current law is such that you have a number of protections regarding access to insurance and coverage of what may or may not be considered a pre-existing condition provided that you have not had a lapse of insurance greater than 61 days. So make sure if at all possible that you meet this criteria.

Information about COBRAis here .

HOWEVER, depending on your coverage at your new job you may or may not want to elect for COBRA. COBRA is often much more expensive than buying it yourself, direct, and you have no control over the cost since you can't shop around - you get the plan you have now, period. Additionally as much as a 2% (bullshit) administrative fee can be charged by your former employer.
posted by phearlez at 11:32 AM on July 29, 2005