Vesting schedules mean a 401(k) match can take years to own

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44% of plans offer a “rare” benefit

Companies use different time frames, or vesting schedules, to determine how long it takes savers to fully own employer contributions.

In some cases, they have to work in a company for at least six years before the funds are returned to them. They risk losing some of the money and investment income if they leave early.

A worker retains full ownership of their match when it is 100% vested. An important note: an employee always fully owns their own contributions.

According to the PSCA survey, more than 44% of 401(k) plans offer immediate full vesting of a business match. This means that the worker owns the entire game immediately, which is the best outcome for savers. This share is up from 40.6% in 2012.

For the rest, acquisition times may vary

The remaining 56% of 401(k) plans use an “abrupt” or “graded” schedule to determine timing.

Cliff acquisition grants full ownership after a specific point. For example, a saver whose 401(k) uses a three-year cliff vest fully owns the company match after three years of service. However, they get nothing before that.

Graduated schedules are installed gradually, at regular intervals. An investor with a five-year sliding scale holds 20% after the first year, 40% after the second year, and so on until it reaches 100% after the fifth year.

For example, someone who gets 40% of a $5,000 match can walk away with $2,000 plus 40% of any investment income on the match.

Federal rules require full vesting within six years.


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