Business, Legal & Accounting Glossary
To become vested employees of a company or corporation must adhere to a waiting period. The employer determines the length of time required to become vested; it usually ranges anywhere from one to five years. By being vested an employee becomes eligible for a full percentage of the contributions that their employer makes to their pension or qualified benefit program. The amount to be vested applies to employer payments made either to the company’s profit-sharing plan or Employee Stock Ownership Plan (ESOP). Being vested into an employer benefit program relates only to the portion the employer contributes. Accordingly, what employees contribute of their own money doesn’t need to be vested. After an employee is fully vested, the employee is eligible to retain the entire amount contributed by their employer, even if they decide to leave the company prior to retirement.
When something is vested, the recipient receives a certain right. This right usually entails receiving a benefit, such as a vested stock option or a vested pension plan. Vesting is typically bestowed through the passage of time. For example, after ten years of service with the company, an employee becomes vested in the corporate pension plan.
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This glossary post was last updated: 13th April, 2022 | 0 Views.