Editing Vesting (section)

===Retirement plans===
Vesting is an issue in conjunction with [[employer]] contributions to an [[employee stock option]] plan, deferred compensation plan, or to a retirement plan such as a [[401(k)]], [[Annuity (financial contracts)|annuity]] or [[pension]] plan.

Once a retirement plan is fully vested, the employee has an absolute right to the entire amount of money in the account.<ref>{{cite book |last1=Joel |first1=Lewin G. |title=Every employee's guide to the law : everything you need to know about your rights in the workplace--and what to do if they are violated |date=1996 |publisher=Pantheon Books |location=New York |isbn=9780679758679 |page=128 |edition=Rev. and updated to include new laws}}</ref> It is a "basic right that has been granted, or has accrued, and cannot be taken away"; for example. one has a right to a vested [[pension]].<ref>Ballentine's Law Dictionary, p. 577 (1991).</ref>

Generally, the portion ''vested'' cannot be reclaimed by the employer, nor can it be used to satisfy the employer's debts. Any portion not vested may be forfeited under certain conditions, such as termination of employment. The portion invested is often determined [[pro-rata]].<ref>{{cite web |title=Retirement Topics - Vesting |url=https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting |website=IRS |publisher=Internal Revenue Service |access-date=16 October 2021 |date=3 June 2021}}</ref>

Generally, for [[retirement plans in the United States]], employees are fully vested in their own salary deferral contributions upon inception.  For employer contributions, however, such as those from an [[employer matching program]], the employer has limited options under the [[Employee Retirement Income Security Act]] (ERISA) to delay the vesting of their contributions to the employee. For example, the employer can say that the employee must work with the company for three years or they lose any employer contributed money, which is known as ''cliff vesting''. Or it can choose to have the 20% of the contributions vest each year over five years, known as ''graduated vesting'' or ''graded vesting''.

Choosing a vesting schedule allows an employer to selectively reward employees who remain employed for a period of time. In theory, this allows the employer to make greater contributions than would otherwise be prudent, because the money they contribute on behalf of employees goes to the ones they most want to reward.