CandleFocus Glossary Editor
Vested benefit refers to retirement benefits that a plan participant has the legal right to keep, regardless of any other factors or when a participant or their employer ceases to participate in the plan. In other words, it is retirement benefits that have not been forfeited, revoked, or taken away due to leaving a job before a certain vested date or failure to fulfill other requirements.
Vested benefits are usually structured as a percentage of the total pension plan balance, so the longer the employee is with the employer, the more of the plan balance they can receive. Generally, vested benefits are considered the employee’s personal property, regardless of whether they stay with the company until retirement.
In order to earn vested benefits, employers usually must offer an employee a certain amount of service credit each year. These credits can vary depending on the employer.
A vesting schedule will often stipulate when an employee is eligible to receive the vested benefits. Many employer-sponsored benefit plans require employees to be vested after a certain period of time, typically 3 to 5 years. This vesting schedule specifies when an employee has earned their vested benefits, regardless of whether or not they are still employed by the company at the time.
Vested benefits become a major deciding factor when employees consider leaving a job for a different employer. Because vested benefits are difficult to replace, employees will typically assess the potential loss of vested benefits before opting to switch employers. Vested benefits are especially important when individuals near retirement age because they are often unable to replicate their current level of retirement benefits at a new job.
Thus, vested benefits are a type of retirement benefit that gives employees the right to receive a portion of the retirement plan balance even if they move on to a new job. It is important to understand the vesting schedule and how much of the retirement plan balance is vested in order to maximize the benefit when a person decides to switch employers or retire.
Vested benefits are usually structured as a percentage of the total pension plan balance, so the longer the employee is with the employer, the more of the plan balance they can receive. Generally, vested benefits are considered the employee’s personal property, regardless of whether they stay with the company until retirement.
In order to earn vested benefits, employers usually must offer an employee a certain amount of service credit each year. These credits can vary depending on the employer.
A vesting schedule will often stipulate when an employee is eligible to receive the vested benefits. Many employer-sponsored benefit plans require employees to be vested after a certain period of time, typically 3 to 5 years. This vesting schedule specifies when an employee has earned their vested benefits, regardless of whether or not they are still employed by the company at the time.
Vested benefits become a major deciding factor when employees consider leaving a job for a different employer. Because vested benefits are difficult to replace, employees will typically assess the potential loss of vested benefits before opting to switch employers. Vested benefits are especially important when individuals near retirement age because they are often unable to replicate their current level of retirement benefits at a new job.
Thus, vested benefits are a type of retirement benefit that gives employees the right to receive a portion of the retirement plan balance even if they move on to a new job. It is important to understand the vesting schedule and how much of the retirement plan balance is vested in order to maximize the benefit when a person decides to switch employers or retire.