Graded Vesting

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Dictionary Says

Definition of 'Graded Vesting'

The process by which employees gain a certain percentage of irrevocable rights over employer contributions made to the employee's retirement plan account each year until the employee is fully vested. With graded vesting, an employee will become vested in at least 20% of their accrued benefits following an initial period of service, with an additional 20% in each following year until full vesting occurs. The initial period of service can vary depending on how the employer determines the amount of its contributions.
Investopedia Says

Investopedia explains 'Graded Vesting'

For example, if an employer's contribution is based on a fixed percentage of the employee's contribution, the initial period of service might be two years. After two years, the employee would be 20% vested, after three years, 40%, with the employee eventually becoming fully vested after six years. Graded vesting differs from cliff vesting where employees become immediately 100% vested following an initial period of service.

Employers must follow certain federal laws that determine the longest allowable vesting periods; however, they are able to choose shorter periods. In addition, if a plan is terminated, all participants become fully vested immediately.

Search results for

'Graded Vesting'

  • 401(k) And Qualified Plans: Eligibility Requirements ...

    http://www.investopedia.com/university/retirementplans/qualifiedplan/qualifiedplan2.asp
    ... An employer may chose between two types of vesting schedules: cliff vesting or graded
    vesting. ... Three-Year Cliff Vesting, Seven-Year Graded Vesting. ...

  • How Restricted Stock And RSUs Are Taxed

    http://www.investopedia.com/articles/tax/09/restricted-stock-tax.asp
    ... Restricted stock also generally becomes available to the recipient under
    a graded vesting schedule that lasts for several years. ...

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