I'm reading over some benefits documents


Your contributions to the account are vested immediately. You are fully vested in company contributions after two years. If you were a contractor at XXXXX before you were hired as an XXXXX employee, your time as a contractor may count toward your stock retirement plan (401(k)) vesting.

I just want to get a sense of how this is typically interpreted,

Say I started work as a permanent employee on 1/1/2015 and accrued company contributions until exactly two years later 1/1/2017 say for a total of $20K. Is this vestment on that portion of $20K that has been in the account for 2 years, making that $20K proportionally vest over the next 2 years or is the full $20K to be vested at once. In other words are the employer contributions itemized by contribution date or is it a lump sum thing?

1 Answer 1


There are two dates that matter for vesting in this situation:

  • Your effective start date (1/1/15 in this example)
  • 2 years after that start date (1/1/17 in this example)

If you left the company on 12/31/16, you would be entitled to none of the company contributions. If you left on 1/1/17, you would be entitled to all $20k. This is sometimes known as a cliff vesting schedule.

Some companies do a stair step - 20% after year 1, 40% after year 2, etc. This is known as graded vesting. But, that is not the case based on the language here.

  • Incidentally it looks like my contractor years prior to converting to permanent were not accounted for judging by my last month's account summary statement listing the vested balance as only the employee contributions. Funny how cheap promises come with the contracting world, I just noticed last night that the phrase is "may count toward..." subtle difference from the colloquial language thrown about at the company about how they do count. Could be an administrative error I suppose too, but either way I since jumped the cliff, lol.
    – jxramos
    Aug 12, 2017 at 19:03
  • @jxramos Not in the US, but if I saw "If you were a contractor ... may count toward" then as a matter of course I'd explicitly make it known in writing that this applies -- I can see situations where those dealing with permanent staff aren't necessarily aware you were previously a contractor unless explicitly told.
    – TripeHound
    Aug 14, 2017 at 8:14

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