Retirement Plan Vesting and Forfeitures
Vesting measures ownership. Employee deferrals are always fully vested, while employer contributions may vest under the plan’s schedule unless a rule requires immediate vesting.
Reviewed July 29, 2026 · Source-led practitioner reference
What is always vested
An employee’s elective deferrals and related earnings are 100% vested. Safe-harbor required contributions, SIMPLE contributions, and certain other sources also have immediate-vesting requirements.
Common maximum schedules for employer contributions
| Years of vesting service | Three-year cliff | Six-year graded |
|---|---|---|
| 1 | 0% | 0% |
| 2 | 0% | 20% |
| 3 | 100% | 40% |
| 4 | 100% | 60% |
| 5 | 100% | 80% |
| 6 | 100% | 100% |
Service-credit questions
- Does the plan use hours, elapsed time, or another permitted method?
- Which computation period applies?
- Does predecessor or related-employer service count?
- How do breaks in service and rehire restoration rules operate?
- Has normal retirement age, death, disability, or plan termination triggered full vesting?
Forfeiture administration
A forfeiture is not free employer money. The plan document must govern when forfeitures occur and how they are used—for example, to pay plan expenses, reduce employer contributions, or provide allocations. The sponsor should use forfeitures timely, reconcile the suspense account, and restore amounts when a rehired participant satisfies the plan’s restoration rules.
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Use this public guide for quick orientation and source review. Inside PrepToPay Benefits, you can study the topic in structured lessons, practice applying it, review flashcards, and track your progress across the broader Benefits curriculum.
Primary sources
Educational reference only. Plan documents, governing law, agency guidance, and plan-specific professional advice control.
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