Understanding Vesting Rules

An employee's vesting percentage determines the portion of a benefit that the employee owns, even if the employee leaves the company. Typically, vesting is based on years of service, although there can be other requirements—for example, age.

The heart of the vesting rules is a schedule, which associates the vesting percentages with lengths of service or other requirements. The schedule can show a single "cliff" amount after which employees are 100 percent vested, or it can show a series of "steps" over which vesting gradually increases.

There may also be overrides to the schedule or conditions for immediate full vesting or for vesting forfeiture. For example:

• If a plan offers disability retirement, disability may trigger full vesting.

• A contributory plan may state that an in-service withdrawal of contributions triggers vesting forfeiture.