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44% of plans offer a ‘rare’ advantage
Companies use different timelines, or vesting schedules, to determine how long it takes for savers to fully own the employer contributions.
In some cases, they must work at a company at least six years before the funds are theirs. They risk forfeiting some of the money, and investment earnings, if they walk away early.
A worker retains complete ownership of their match when it is 100% vested. One important note: An employee always fully owns their own contributions.
More than 44% of 401(k) plans offer immediate full vesting of a company match, according to the PSCA survey. This means the worker owns the whole match right away, which is the best outcome for savers. That share is up from 40.6% in 2012.
For the rest, vesting timelines may vary
Almost 30% of 401(k) plans use a graded five- or six-year schedule for their company match, according to the PSCA survey. This formula is most common among small and midsize companies.
Vesting schedules tend to be a function of company culture and the philosophy of executives overseeing the retirement plan, Ellen Lander, principal and founder of Renaissance Benefit Advisors Group, based in Pearl River, New York, previously told CNBC.
Further, there are instances in which a worker may become 100% vested regardless of the length of their tenure.
For example, the tax code requires full vesting once a worker hits “normal retirement age,” as stipulated by the 401(k) plan. For some companies, that may be age 65 or earlier.
Some plans also offer full vesting in the case of death or disability.