Frank is considering a new job. However he is concerned about his pension fund. He knows that Vesting which is the requirement that he must work for his firm for a specified period of time prior to gaining ownership of the retirement contributions made by his employer has to be met first.
<h3>What is a Vesting?</h3>
“Vesting” in a retirement plan means ownership. This means that each employee will vest, or own, a certain percentage of their account in the plan each year. An employee who is 100% vested in his or her account balance owns 100% of it and the employer cannot forfeit, or take it back, for any reason.
Participants in a defined-benefit retirement plan need to understand the plan's vesting schedule so they know when they are eligible to receive full benefits. Pension vesting for employer contributions in a private pension plan is set by federal law and follows either a cliff vesting or a gradual vesting schedule.
Governmental and church pension plans are not subject to ERISA regulations. Exceptions to ERISA and breaks in your employment record with an employer can alter vesting and the amount of pension you're entitled to.
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