19.9.1 Cliff Vesting and Graded Vesting
Cliff vesting means that the employee must have five years of service before becoming vested, at which point the employee is 100% vested.
For plans that include matching employer contributions in defined contribution plans only, two new schedules are required.
- Three-year cliff vesting - 100% vestige after three years of service
- Two to six-year graduated vesting (also known as graded vesting) - 20% increase each year beginning after two years of service until 100% vested after six years of service
Employers are not restricted from variations of these vesting schedules as long as their schedule is no less favorable than those described.
