What Is Vesting?

Vesting refers to an employee’s entitlement to funds contributed to a qualified, employer-sponsored retirement plan. An employee’s contributions—and the earnings on these contributions—are fully vested from his or her start in the plan. However, an employer’s matching contributions may vest according to the employee’s length of service. Thus, an employer’s matching contributions may follow a vesting schedule that rewards loyalty by fully vesting plan participants after a specified number of years.

You may lose some of the employer-provided benefits you have earned if you leave your job before you have worked long enough to be vested. However, once vested, you have the right to receive the vested portion of your benefits even if you leave your job before retirement. An employee who reaches normal retirement age is entitled to 100% vesting.

 

 

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