Vested Benefit

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Definition of 'Vested Benefit'

A vested benefit is a right to receive a pension or other retirement benefit that is not subject to forfeiture if an employee leaves the company before retirement. Vesting refers to the process by which an employee's right to a pension or other retirement benefit becomes secure.

There are two main types of vesting:

* **Immediate vesting:** This is the most common type of vesting. Under immediate vesting, an employee's right to a pension or other retirement benefit is fully vested as soon as they start working for the company.
* **Graduated vesting:** This is a type of vesting in which an employee's right to a pension or other retirement benefit vests gradually over time. For example, an employee may be 25% vested after one year of service, 50% vested after two years of service, and 100% vested after three years of service.

The vesting schedule for a pension or other retirement benefit is typically specified in the employee's plan document.

The purpose of vesting is to protect employees from losing their retirement benefits if they leave their job before retirement. Vesting also encourages employees to stay with their employer for a long time, which can benefit both the employer and the employee.

There are a few things to keep in mind about vesting:

* Vesting is not the same as eligibility. An employee may be eligible to participate in a pension or other retirement plan before they are vested. However, if they leave the company before they are vested, they will not be entitled to receive any benefits from the plan.
* Vesting is typically based on years of service. However, some plans may also include a vesting requirement based on age or a combination of years of service and age.
* Vesting can be lost if an employee breaks the terms of their employment agreement. For example, an employee may lose their vesting if they are fired for cause or if they voluntarily resign from their job.

If you have any questions about vesting, you should speak to your employer or a financial advisor.

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