In Retirement, What Does Vested Mean?
Retirement plans have specific verbiage they use to refer to retiree access to dollars. Vesting is the process of an employee becoming eligible to receive retirement funds. Vesting conditions differ depending on the individual company's retirement plan document.
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Contributions
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Employer contributions to your retirement may vest over time. Contributions made to defined contribution plans, such as a 401k, may become available after a number of years of service. Dollars contributed to these plans by an employee do not vest and belong to the employee; vesting only applies to employer contributions.
Service
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Pensions may be locked until employees obtain enough service years. Defined benefit plans, such as pensions, may vest after a formula involving age and years of service. Employees may be required to meet a minimum number of years of service or minimum age to qualify for any benefit, which expands as the worker continues in service and ages.
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Death and Disability
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Some plans vest early when employees become disabled. Some plans allow for immediate vesting to a family upon the death of a loved one. Vesting schedules may be shortened in the event of disability.
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References
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