vesting

How the Vesting Rules Work for Company Retirement Plans

Employees leaving their jobs are often surprised to discover they aren’t entitled to the full balance of their company plan account. The reason is that some plans impose a vesting rule on certain types of contributions. What do the vesting rules mean? They tell you how much of your plan benefit you actually own and cannot be taken away from you. If you’re fully vested, you’re entitled to your entire benefit. If partially vested, you only get a portion of your benefit.

VESTING RULES FOR COMPANY PLANS

If you’re thinking about leaving your job, you may want to inquire about your company retirement plan’s vesting schedule. If you are close to becoming vested in a retirement benefit, it may pay to stick it out until you have enough service to become vested. Otherwise, you may lose out on a valuable benefit. Being fully vested in your benefit means that you have earned a benefit that cannot be taken away from you. If you are partially vested, you will receive only a portion of your benefit. If you are 0% vested, you will receive no benefit at all. The unvested portion of your benefit will be forfeited in the case of a partially-vested or 0%-vested benefit.

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