Cliff Vesting is when vesting of 401k retirement accounts occurs all at once, rather than a gradual phased out period of time. Instead of a percentage of your employer’s 401k match-up contributions being vested over a phased out period of time, the vesting will occur all at once after a certain period of time, e.g 5 years.
Compare the traditional 401k Vesting schedule with the Cliff Vesting Schedule:
Traditional 401k Vesting Schedule
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401k Vesting Guideline Schedule 1 set by ERISA
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| Years of Work Vested | Percentage of Accrued Benefits Vested |
| Less than 3 | 0% |
| Atleast 3, but not >4 | 20% |
| Atleast 4, but not >5 | 40% |
| Atleast 5, but not >6 | 60% |
| Atleast 6, but not >7 | 80% |
| Atleast 7 | 100% |
Cliff Vesting Schedule
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401k Vesting Guideline Schedule 1 set by ERISA
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| Years of Work Vested | Percentage of Accrued Benefits Vested |
| 0-6 Years | 0% |
| 7 Years | 100% |
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What is 401k Vesting and How Does it Work?
Vesting is a type of security feature for companies to retain talented and hardworking employees for the longer term. 401k Vesting is the amount of time you MUST work for a company to fully accrue your 401k savings and not forfeit them (if you quit your job prematurely). Thus, when you are “fully vested”, this means you have accrued your 401k retirement savings fully and can rollover into an IRA incase you quit working for the company… (Read Full)
