Cliff Vesting Law and Legal Definition

Cliff vesting is a vesting schedule that is a characteristic of some retirement plans. Cliff vesting is associated with plans such as 401(k), 457, and 403(b). An employee is considered "vested" in an employer benefit plan when s/he has earned the right to receive benefits from that plan. Cliff vesting occurs when an employee becomes fully vested all at once after a specified time period, rather than partially or gradually.

There are certain statutory requirements that cliff vesting schedules have to comply. Vesting requirements cannot be placed on employee contributions. Money that an employee contributes from his/her paycheck is essentially immediately fully vested.