Cliff Vesting – 401k Retirement Glossary

Cliff Vesting is when vesting of 401k retirement accounts occurs all at once, rather than a gradual phased out period of time. Instead of a percentage of your employer’s 401k match-up contributions being vested over a phased out period of time, the vesting will occur all at once after a certain period of time, e.g 5 years.

Compare the traditional 401k Vesting schedule with the Cliff Vesting Schedule:

Traditional 401k Vesting Schedule

401k Vesting Guideline Schedule 1 set by ERISA
Years of Work Vested Percentage of Accrued Benefits Vested
Less than 3 0%
Atleast 3, but not >4 20%
Atleast 4, but not >5 40%
Atleast 5, but not >6 60%
Atleast 6, but not >7 80%
Atleast 7 100%

Cliff Vesting Schedule

401k Vesting Guideline Schedule 1 set by ERISA
Years of Work Vested Percentage of Accrued Benefits Vested
0-6 Years 0%
7 Years 100%

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