Vesting is an Employee Retirement Income Security Act (ERISA) guideline stipulating that employees must be entitled to their benefits from a pension fund, profit-sharing plan or Employee Stock Ownership Plan, within a certain period of time, even if they no longer work for their employer. Vesting refers to an absolute right, as opposed to a mere expectation.
The retirement plan summary should explain about the plan's vesting schedule. In general, money you contribute to the plan (for example, through a 401(k) plan) is vested immediately. If you leave employment you will be able to receive your money back, or "roll" it into an IRA or, perhaps into your new employer's 401(k) plan. Money contributed by your employer will become "vested" after you have worked for your employer for a specified period of time. This time period varies and is governed by each employer's policies or collective bargaining agreement. Some plans provide for no vesting until after a set period of time after which you will be 100% vested. Other plans provide for partial vesting on a graduated basis, so that a higher percentage is vested based on longer periods of service.
