vesting
VES-ting
/ˈvɛstɪŋ/
The process by which an employee earns the right to receive full benefits from an employer-sponsored retirement plan.
Vesting usually happens over a period of years; if you leave before you are 'fully vested', you lose the employer's contributions.
The story behind the word. From the Latin 'vestire', meaning 'to clothe'. When a right 'vests' in you, you are figuratively being 'clothed' with the legal authority or ownership of that asset.
Word relationships
- entitlement: A broader term for having a right to something.
- forfeiture: The loss of a right or property as a result of leaving early.
Commonly confused with
- accrual: Accrual is the growth of the amount; vesting is the legal right to own that amount.
Word family
- vest (verb): To confer a right or power on someone.
Collocations
- vesting period
- fully vested
- vesting schedule
Example sentences
- "The startup offered a four-year vesting schedule with a one-year cliff." Employment Law
- "Once you reach five years of service, your vesting in the pension plan is complete." Corporate Policy
Memory hook
Think of a 'vest'. Once you've worked long enough, the company puts the 'vest' of ownership on you. Clothed in legal rights.
When not to use
Don't use 'vesting' for your own contributions; you are always 100% vested in money you put in yourself.
Fun facts
- This is the same root as 'vestment' (priestly robes) and 'invest' (to put capital into 'clothing' or 'form').
Related words
Explore more words
retention, severance, gratuity, onboard, allocation, accumulation
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