Vesting defines your ownership of the money in your 401(k) account. Some contributions are always yours immediately, while others may require you to meet service requirements before you are fully vested.

Contributions That Are Always 100% Yours

You are immediately and permanently vested in the following types of contributions:

  • Employee Contributions (Pre-tax or Roth): The money you personally contribute from your paycheck.
  • Incoming Rollover Contributions: Funds you moved into your company 401(k) plan from another retirement account, such as an IRA or former employer’s 401(k).
  • Safe Harbor Contributions: Employer contributions required under certain plans. (Exception: If your plan uses automatic enrollment with a 2-year cliff vesting schedule, different rules may apply. Refer to your Summary Plan Description for details.)

When You Become 100% Vested Automatically

Even if you haven’t met the service requirements in your employer’s vesting schedule, you become fully vested in all contributions under these circumstances:

  • When you reach Normal Retirement Age (generally age 65)
  • In the event of your death
  • In the event of a qualifying disability (specific plan rules apply)

Contributions That May Follow a Vesting Schedule

Some employer contributions are not immediately yours. Instead, they follow a vesting schedule chosen by your employer:

  • Employer Discretionary Matching Contributions – Money your employer contributes to match part of your deferrals.
  • Employer Profit-Sharing Contributions – Employer contributions not tied to your deferrals, often based on company performance or a set formula.

How Vesting Schedules Work

  • Vesting is generally based on your date of hire.
  • For each calendar year you work 1,000 hours, you earn one year of vesting service.
  • Your employer chooses the vesting schedule, which is detailed in your Summary Plan Description (SPD).

Common types of vesting schedules include:

  • Immediate vesting – 100% ownership right away.
  • Cliff vesting – You become 100% vested after a set number of years (e.g., 3 years).
  • Graded vesting – Ownership increases gradually each year (e.g., 20% per year over 5 years).

Need Help?

If you have questions about vesting, contact us.