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Nonforfeitable ownership (or partial ownership) by an employee of the retirement account balances or benefits contributed on the employees behalf by an employer. The Tax Reform Act of 1986 established minimum vesting rights for employees based on their years of service—full vesting in five years or 20% vesting per year starting by the end of the third year.


The process by which an employee with a qualified retirement plan and/or stock option becomes entitled to the benefits of ownership, even if he/she no longer works at the company providing the retirement plan or stock option. Vesting occurs after an employee has worked at the company for a certain number of years; once vesting occurs, the benefits of the plan or stock option cannot be revoked.


If you are part of an employer pension plan or participate in an employer sponsored retirement plan, such as a 401(k), you become fully vested -- or entitled to the contributions your employer has made to the plan, including matching and discretionary contributions -- after a certain period of service with the employer.

Qualified plans must use one of the standards set by the federal government to determine that period.

If you become entitled to full benefits gradually over several years, the process is called graded vesting. But if you have are entitled only when the full waiting period is up, the process is called cliff vesting. If you leave your job before becoming fully vested, you forfeit all or part of your employer-paid benefits.

However, you are always entitled to all the contributions you make to a retirement plan yourself through salary reduction or after-tax payments.

References in periodicals archive ?
4th DCA 1989), the Fourth District ruled that when a city delayed approval of a permit that satisfied the required criteria and then attempted to pass ordinances to authorize a denial of the permit, such actions evidenced bad faith on the part of the city and created a vested right to develop the property consistent with the permit application.
Annotation, Vested Right of Pensioner to Pension, 54 A.
21) Like most states, Colorado has its own constitutional protection limiting impairment of contracts, (22) and Colorado courts have traditionally protected vested rights in the context of contracts with public employees.
The court noted that even where the legislature has stated its intent for retroactive application, the Florida Supreme Court has refused to apply the statute retroactively if it impairs vested rights, creates new obligations or imposes new penalties.
On the other hand, the defendant argued that the amended statute could not be applied retroactively because the defendant's right to assert the statute of repose as a defense was vested when the plaintiff turned thirty years old in 1993, and this vested right could not be taken away without offending the due process clause of the Illinois Constitution.
the basis of a vested right to build a structure which does not comply
Where an individual took up a profession that critically depended on the observation of rules, and then broke those rules, it could not be contended that he had a vested right to work within that profession.
Second, it gives some insight into the sovereign immunity problem: If the claimant had a vested property right and Congress constituted the United States as trustee of that property, it might be thought that Congress could not (or could not have deliberately intended to) subsequently divest that vested right--just as if Congress had previously granted a vested right in some lands, it could not (or could not have deliberately intended to) subsequently divest the title.
Rejecting A's argument, the Tax Court found constructive receipt inapplicable, because A lacked an "unqualified, vested right to receive immediate payment" in 1989; see Augustin Jombo, TC Memo 2002-273 (citing Richard A.
Constructive receipt requires an unqualified vested right to receive income--there can be no condition, limitation, or restriction that prevents the taxpayer from having unrestricted access to his or her money without penalty.
1944) (finding that police officers had no vested right in their pensions until payment due); Schaub v.
Nonetheless, it held that ERISA did not provide employees with a permanent, vested right to their health insurance benefits.