Consider the following example where an employer matches 50% of your 401k contributions, and there is a 5 year vesting schedule on the match.
Your contribution Employer match Year 1 $10K $5K Year 2 $10K $5K Year 3 $10K $5K Year 4 $10K $5K Year 5 $10K $5K
So after 5 years, your 401K account has $75K in it ($50K from your contributions and $25K from employer matching).
Let's say you leave the company after Year 6. How much of the employer's $25K in matching do you get to keep?
I was always under the impression that you would only get to keep $15K ($5K + $4K + $3K + $2K + $1K) in that scenario. Because after Year 6, 100% of the Year 1 matching had vested, 80% of the Year 2 matching had vested, 60% of the Year 3 matching had vested, 40% of the Year 4 matching had vested, and 20% of the Year 5 matching had vested.
(Edit: The reason I thought that was because at every single company where I have received either a stock option grant or RSU grant, the accompanying vesting schedule was based off the date of the grant, not the date that I started employment. I thought the 401K matching would work the same way.)
But my coworker insists that you would get to keep all $25K in that scenario. He thinks that there is only one vesting schedule that starts when you begin the 401k, and it applies to all current and future employer matches. Is that the case?