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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 ?
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.
To be effective, RSU plans are generally designed with vesting periods of longer than three years.
This means that you, the employee, or both of you, decide to extend the vesting period to delay the time when the compensation is subject to tax.
Restricted stock is stock granted to an employee as compensation, but ownership of it is restricted until a vesting period lapses.
They can accrue dividends during the vesting period and reinvest them in additional shares.
21, 2012 /PRNewswire/ -- Gold Resource Corporation (NYSE MKT: GORO)(the "Company") announced that it is extending to certain of its employees an opportunity to cancel the employee's outstanding unexercised stock options and receive an equal number of replacement options to purchase the Company's common stock at a lower exercise price and subject to a new three-year vesting period.
On June 13, the four-year vesting period of the employees' shares of votes is to expire, and the government will no longer have power of attorney on employees' voting rights.
But as they ramp this up over some vesting period I can't imagine that many will be able to ask investors to accept this as a reason for lower earnings over three or four or five years.
When evaluating your company's plan, consider the investment choices, vesting period, whether the match is made in cash or company stock and the size of the match.
The programme is performance-based and includes a vesting period of three years.
The total vesting period of the deferred stocks is three years, with one third of it vesting each year.