Fully Vested


DEFINITION of 'Fully Vested'

A person's right to the full amount of some type of benefit, most commonly employee benefits such as stock options, profit sharing or retirement benefits. Fully vested benefits often accrue to employees each year, but they only become the employee's property according to a vesting schedule. Vesting may occur on a gradual schedule, such as 25% per year, or on a "cliff" schedule where 100% of benefits vest at a set time, such as four years after the award date.

BREAKING DOWN 'Fully Vested'

By employing vesting schedules, companies seek to retain talent by providing lucrative benefits contingent upon their continued employment at the firm throughout the vesting period. An employee who leaves employment often loses all benefits which were not vested at the time of their departure. This type of incentive can be done on such a scale that an employee stands to lose tens of thousands of dollars by switching employers. This strategy can backfire when it promotes the retention of disgruntled employees who may hurt morale and simply do the minimum required until it is possible to collect previously unvested benefits.

  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Equity Compensation

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  3. Graduated Vesting

    The accelerated benefits employees receive as they increase the ...
  4. Certified Employee Benefit Specialist

    A professional designation available in both the United States ...
  5. Cliff Vesting

    The process by which employees earn the right to receive full ...
  6. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
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  1. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  2. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  3. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  4. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  5. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
  6. Are catch-up contributions included in actual deferral percentage (ADP) testing?

    Though the Internal Revenue Service (IRS) carefully scrutinizes the contributions of highly compensated employees (HCEs) ... Read Full Answer >>

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