Also found in: Dictionary, Thesaurus, Legal, Idioms, Encyclopedia, Wikipedia.
Related to Vesting: Vesting schedule


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 ?
The new restricted stock unit award for 50,000 units will vest over a period of four years, with 25 percent of the restricted stock units vesting after one year, and the remainder vesting in equal quarterly installments thereafter, subject to the grantee's continued employment with Millennial Media on the applicable vesting date.
Director Number of shares vesting 74,355 Total value of shares
In the share-based payment plan, the award for each vesting period of a calendar year is based on the fulfilment of the vesting criteria determined by the Board separately for each vesting period.
Thus, the trustees decided the participant was not entitled to 100% vesting on the plan's termination.
If the value were to decline after the vesting date, some of the value at the time of vesting might never be taxed.
Under this approach, the completion of the May 2006 tender offer, rather than the December 2005 vesting acceleration, represents the modification date of the awards.
The vesting of the options mentioned in clauses (i) and (ii) will accelerate upon a change of control.
The IRS reasoned that the postponement of the shares' vesting dates did not cause them to become transferable, nor did it free the employee from the obligation to provide future services.
AMEX:FLT) announced today that the Compensation Committee of its Board of Directors has accelerated the vesting of unvested stock options previously awarded to employees, officers and directors under the company's equity inventive compensation plans.
A newsletter issued by the IRS's Dallas Key District Office warns plan administrators of two plan practices that may result in violations of the plan qualification rules: (1) disregarding years of service in which an employee does not make elective deferral in determining the vesting of matching contributions in a Sec.
The shares will vest over a period of five years, with 2,000 shares vesting on the first anniversary of the effective date of the restricted stock grant agreement, and the remainder vesting annually over a period of four years.
Any special allocations should take into account the tax effects of the vesting of the interest as well as the earlier cash distribution.