The process by which participants gain ownership (or nonforfeitable rights) in employer contributions made to employer sponsored plans. Certain contributions are always immediately 100% vested. These include salary deferral contributions and all contributions to SEP and SIMPLE IRAs.
Additional Helpful Information
A vesting schedule makes sense only if the plan covers non-owner employees. For plans that cover only the business owners (owner-only plans), for instance the SBO-401(k) plan, contributions are usually 100% vested.
For contributions that are not immediately 100% vested, the plan should be designed to include a vesting schedule which must be within the limits established under the Code.
For example, the following vesting schedule must be used for defined contribution plans
Years of Vesting Service
0% or more
20% or more
40% or more
60% or more
80% or more
100% or more