401(k) vesting, explained

Your 401(k) balance is really two piles. The first is money taken from your paycheck: it is yours immediately and unconditionally, everywhere. The second is money your employer contributed: the match. That pile vests, becoming yours according to a schedule, and if you leave before it does, the unvested part goes back to the plan. There are three shapes of schedule.

The simplest schedule is no schedule. Best Buy’s filing says its match is a safe-harbor contribution that is “immediately 100% vested”, a design the plan adopted back in 2007. Walmart and Coca-Cola vest their match immediately too. At these companies, quitting tomorrow costs you none of the employer money already deposited.

A cliff schedule vests 0% until a service anniversary, then 100% all at once. Wells Fargo uses a 3-year cliff, but only for people hired on or after January 1, 2021; earlier hires stay fully vested. The same plan can treat two coworkers differently based purely on hire date. Exxon Mobil also runs a 3-year cliff, with escape hatches: the match vests in full if you reach age 65 while employed, or die in service. Allstate keeps it shorter at 2 years.

A graded schedule vests in steps. Oracle’s match vests 25% per year of service, reaching 100% after four. O’Reilly Automotive vests 33% at two years, 66% at three and 100% at four. Leave an O’Reilly job after two and a half years, and a third of the accumulated match travels with you; the rest stays behind.

On your last day, the schedule stops. Whatever is vested is yours to keep: leave it in the plan (if the balance is large enough), roll it into another retirement account, or withdraw it under the tax rules that apply. Whatever is unvested is forfeited back to the plan; plans typically use forfeitures to pay expenses or fund future contributions.

Filings also disclose acceleration events, situations where vesting completes early regardless of service. Death and disability are the usual ones; Publix adds reaching age 60, Exxon adds age 65, and plans that terminate generally vest everyone in full. Your recordkeeper statement shows the split: look for “vested balance” next to total balance.