What is cliff vesting?

By Katie Adams AAA
A:



An employee is considered "vested" in an employer benefit plan, once they have earned the right to receive benefits from that plan. Cliff vesting is when the employee becomes fully vested at specified time rather than becoming partially vested in increasing amounts over an extended period of time. An example of "cliff vesting" would be when an employee is fully vested in a pension plan after 5 years of full time service. Partial vesting would occur if the employee were considered 20% vested after two years of employment, 30% vested after three years of employment and 100% vested after 10 years of employment. In a cliff vesting pension plan, if an employee leaves the company before becoming fully vested, he or she would not receive any retirement benefits.

For more on this topic, be sure to read our Retirement Plans Tutorial.



This question was answered by Katie Adams.



RELATED FAQS

  1. What moral hazards are present with salaried employees?

    Discover that moral hazards are a common problem facing many companies today. The good news is that there are plenty of ways ...
  2. What are the best ways to pay less income tax?

    Learn about reducing your income tax burden by contributing to an employer-sponsored retirement plan or IRA, and see what ...
  3. What types of companies usually offer fringe benefits?

    Learn what types and sizes of companies typically offer fringe benefits to employees in an effort to recruit as well as retain ...
  4. What is Warren Buffett's annual salary at Berkshire Hathaway?

    Learn more about how much Warren Buffett receives in salary and how he continues to stay involved with his company and his ...
RELATED TERMS
  1. Back Pay

    The amount of salary and other benefits that an employee claims ...
  2. Contingent Commission

    A commission with a value dependent on an event occurring, and ...
  3. Collection Commission

    The percentage of premiums that an agent is owed for collecting ...
  4. Cash Bonus

    A lump sum of money awarded to an employee, either occasionally ...
  5. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  6. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...

You May Also Like

Related Articles
  1. Professionals

    Why Retirement Advice Is Better But ...

  2. Professionals

    Coming Soon: Private Equity In 401(k) ...

  3. Professionals

    Ways To Cut 401(k) Expenses

  4. Professionals

    Tread Carefully With Retirement Plan ...

  5. Mutual Funds & ETFs

    ETFs Commonly Found In Retirement Accounts

Trading Center