Fully Vested

What is 'Fully Vested'

Fully vested is 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.

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RELATED FAQS
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    An employee is considered "vested" in an employer benefit plan, once they have earned the right to receive benefits from ... Read Answer >>
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    I used to make $60,000 a year at my old job, but I changed careers and now make $42,000 a year with 20... Read Answer >>
  3. Can my company ever be entitled to take my 401(k)?

    Find out why your employer may be able to take part of your 401(k) if you leave your employment too soon, including how different ... Read Answer >>
  4. How do I "vest" something?

    Vesting is a term usually related to pension plans that some employer's provide to their employees.An employer may make contributions ... Read Answer >>
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    A vest fleece is a term first coined by Jack Ciesielski, founder of The Analyst's Accounting Observer, and it relates to ... Read Answer >>
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