Every plan has optional eligibility requirements, which were selected by your employer when the Plan was established. The maximum eligibility waiting period is one year and age 21.
After you meet the eligibility requirements in your Plan, you are able to enter the Plan on the next entry date, again as selected by your employer. Entry dates are based on the plan year (i.e. 1/1 – 12/31 or 7/1 – 6/30). If your plan year is on a calendar year, entry dates could be 1/1 or 7/1 if dual entry, or 1/1, 4/1, 7/1 or 10/1 if quarterly entry. Some plans have monthly or even immediate entry. Please refer to the Plan Information option under the “Retirement Planning” tab after you login to your account.
Vesting means that the money you have in the Plan belongs to you and cannot be taken away, or forfeited, if you leave your employer.
Your personal 401(k) contributions and earnings are fully vested at all times – this is your money. The contributions your employer makes (either matching or profit sharing) may be subject to a “vesting schedule” established by the Plan.
Beginning in 2002, matching contributions must be vested under a more rapid schedule than other types of employer contributions.
The two options for the least rapid vesting schedules beginning in 2002 are:
Minimum Vesting Schedules
| Graded Vesting Schedule Alternative | ||
|---|---|---|
Years of Service |
Matching % | Profit Sharing % |
| less than 2 | 0% |
0% |
2 |
20% |
0% |
3 |
40% |
20% |
4 |
60% |
40% |
5 |
80% |
60% |
6 |
100% |
80% |
7 or more |
100% |
100% |
| Cliff Vesting Schedule Alternative | ||
less than 3 |
0% |
0% |
3 |
100% |
0% |
4 |
100% |
0% |
5 or more |
100% |
100% |
Usually an employer will only pick one vesting schedule even if it makes both matching and profit sharing contributions. If your Plan has matching contributions and only one schedule, it would be at least as fast as the Matching % shown above.
Vesting protects your account if you quit, get laid off or fired.