Definition:
In general, vested means fixed or absolute. The term "vested" is most often used to refer to the ability of an employee to take employer contributed retirement benefits from a retirement plan when the employee leaves the company. Employees can always take their own contributions from a plan when they leave a company, so employee contributions are always 100 percent vested. Vesting can occur anywhere from 5 to 10 years after hire, depending on the provisions of the individual company retirement plan.[/p/]
Some employer retirement plans allow contributions to become vested in increasing percentages over time. This process is termed "vesting."
Examples:
Sam's company created a Safe Harbor 401(k) plan, and the company's contributions to Sam's account were fully vested from the beginning of the plan. He decided to take all of this money with him when he left the company.
