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Advisors of Horizon are Registered Representatives of Cetera Advisors LLC, a broker/dealer and Registered Investment Adviser.

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  2. What's Your Vesting Schedule?

May 15, 2019

In this episode of Inside the Plan with the 401(k) Brothers, Bill Bush and Andy Bush, advisors at Horizon Financial Group, talk about what exactly “vesting” means, the various distinctions between vesting schedules, and the ways these vested money options operate. 

 

Episode Highlights:

 

  • 0:40 – Bill Bush shares where the word “vest” comes from.
  • 1:03 – What does vesting mean?
  • 2:14 – What is a cliff vesting schedule?
  • 3:04 – How does a graded vested schedule work?
  • 5:06 – How can safe harbor plans operate?
  • 6:05 – What should you know about loans for vested money?
  • 6:43 – What can prevent you from getting your employer match money?
  • 7:57 – Which exceptions can occur in vesting schedules?

 

3 Key Points:

  1. Vesting schedules have to do with the employer’s contributions.
  2. Cliff vesting schedule means you are a 0% owner in that money for three years, then you are 100% owner of it after that.
  3. Plans with loans typically have borrowing minimums of $1000 and maximums of $50,000, which have to be at least 50% of the vested amount.

 

Tweetable Quotes:

  • “When we’re talking about what vesting means is ownership. Of course, in a 401(k) plan, when a participant defers their dollars, they own 100% of those dollars going in, they are vested in their contributions.” – Bill Bush.
  • “A graded vested schedule is usually going to go in 20% increments, where the first year would be zero.” – Andy Bush.
  • “Depending on the plan, plans can put in place. Where they say, ‘You have to be employed on the last calendar day of the year to receive their discretionary match.” – Andy Bush.

 

 

Resources Mentioned: