Graduated Vesting

AAA

DEFINITION of 'Graduated Vesting'

The accelerated benefits employees receive as they increase the duration of their service to an employer. A vesting schedule is mandated by federal law for the employers' contribution portion of private retirement plans. It specifies the minimum number of years a company may require employees to work in order to earn the vested right to all or part of the employer contributions.

BREAKING DOWN 'Graduated Vesting'

A graduated vesting schedule for a defined benefit plan requires an employee to have worked for a certain number of years in order to be 100% vested in the employer funded benefits. For example, an employee may have to work for seven years to become fully vested, but will be 20% vested after three years, 40% vested after four years, 60% after five years, and 80% after six years of service.

RELATED TERMS
  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Accelerated Vesting

    A form of vesting that takes place at a faster rate than the ...
  3. Cliff Vesting

    The process by which employees earn the right to receive full ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  6. Sticky Wage Theory

    An economic hypothesis theorizing that pay of employees tends ...
Related Articles
  1. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
  2. Retirement

    Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.
  3. Retirement

    Weave Your Own Retirement Safety Net

    Build savings to support yourself in case pension plans and Social Security fall through.
  4. Retirement

    Is Your Defined-Benefit Pension Plan Safe?

    Your plan may not last in a rocky market. Find out whether your savings will be affected.
  5. Retirement

    The Defined-Benefit Plan's Many Problems

    The shift in retirement plan schemes - from defined benefit plans to defined contribution plans - raises some important issues.
  6. Personal Finance

    Salary Secrets: What Is Considered a Big Raise?

    A 4% or 5% annual jump in pay may not sound huge, but in today’s environment, it actually means you’re faring better than most.
  7. Economics

    What Does Vesting Mean?

    Vesting is the process of accruing non-forfeitable rights.
  8. Retirement

    What's a 401(a) Plan?

    A 401(a) plan is a type of money-purchase retirement plan set up by an employer.
  9. Investing

    Build a Retirement Portfolio for a Different World

    When it comes to retirement rules of thumb, the financial industry is experiencing new guidelines and the new rules for navigating retirement.
  10. Investing

    Automating Your 401(k) is Easier Than You Think

    If you like automation, you should check out these features that many 401(k) plans offer.
RELATED FAQS
  1. What are the penalties of cashing out a 401(k) before retirement?

    Standard distribution regulations for 401(k) retirement accounts require that you reach age 59.5 or become unable to work ... Read Full Answer >>
  2. Are mutual funds considered retirement accounts?

    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
  3. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
  4. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
  5. Can creditors garnish my IRA?

    Depending on the state where you live, your IRA may be garnished by a number of creditors. Unlike 401(k) plans or other qualified ... Read Full Answer >>
  6. Can my IRA be used for college tuition?

    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Depreciation

    1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both ...
  2. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  3. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  4. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  5. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  6. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!