ABA Family Legal Guide

The Rights of Older Americans

Pensions

Traditional Pension Plans

When are my pension rights vested?

Amendments to Employee Retirement Income Security Act (ERISA) in 1989 changed the vesting rules. Now, your pension rights must either vest completely after five years or vest partially after three years of service. Complete vesting after five years is called cliff vesting. If you work less than five years under cliff vesting, you are not entitled to any pension benefits, but once you hit the five-year mark you have a right to 100 percent of the benefits you have earned. Partial vesting is called graded vesting. Under this system, your rights become 20 percent vested after three years of service, 40 percent vested after four years, and so on up to 100 percent vested after seven years.

You do not get to choose which vesting method applies. The employer decides.