What is the difference between vested and non-vested employer contributions?

What is the difference between vested and non-vested employer contributions?

• A. Vested contributions are nonforfeitable; non-vested contributions can be forfeited on termination before vesting.
• B. Vested contributions are forfeited on termination; non-vested are nonforfeitable.
• C. Both are always nonforfeitable; vesting only affects retirement age.
• D. Neither type is subject to forfeiture.

Answer: (A)

Vesting determines ownership of employer contributions. When contributions are vested, they are nonforfeitable—you keep them even if you leave the employer. If contributions aren’t yet vested, you can forfeit the unvested portion if you terminate before you reach the vesting schedule. So the key difference is whether you own the contributions outright or risk losing them if you depart early. For example, under a typical vesting schedule, you might gain ownership gradually over several years; leaving before the schedule ends means forfeiting the portion that isn’t yet vested. The other statements either reverse forfeiture, claim vesting doesn’t affect forfeiture, or say vesting doesn’t relate to forfeiture, which isn’t accurate.

Vesting determines ownership of employer contributions. When contributions are vested, they are nonforfeitable—you keep them even if you leave the employer. If contributions aren’t yet vested, you can forfeit the unvested portion if you terminate before you reach the vesting schedule. So the key difference is whether you own the contributions outright or risk losing them if you depart early. For example, under a typical vesting schedule, you might gain ownership gradually over several years; leaving before the schedule ends means forfeiting the portion that isn’t yet vested. The other statements either reverse forfeiture, claim vesting doesn’t affect forfeiture, or say vesting doesn’t relate to forfeiture, which isn’t accurate.