Vesting definition

Vesting is the process by which the rights to an asset pass to a recipient. The concept is most commonly used in reference to a pension plan, where an employee gains the right to future payments from the plan. For example, an employer offers 100% vesting in the employer matching of any employee payments made into a 401(k) retirement plan, but only after the employee has worked for the company for five years. In this example, five years is the vesting period. The intent behind vesting is to retain employees for an extended period of time, thereby reducing the negative effects associated with employee turnover.

Related Courses

Human Resources Education Bundle 
Human Resources Guidebook