Employees are always 100% vested in their own contributions. Vesting in employer contributions is determined by the schedule you adopt. The plan provides three options:
- Immediate. Employer contributions are 100% vested from the day of enrollment.
- Five-year cliff. Employees are 100% vested after five years of service.
- Seven-year graded. Employees vest in 20% increments, beginning after three years of service. 100% vesting comes with seven years of service.
More than 80% of employers choose immediate vesting. There is no advantage for employers in selecting a delayed vesting schedule, since forfeited contributions are not returned to employers, but are distributed annually to the remaining participants in the five-year or seven-year vesting plans.