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.