Vesting
The schedule on which employer-contributed money becomes legally yours.
Vesting is the rule that determines when contributions made on your behalf become legally yours to keep. Two main forms exist:
Cliff vesting: you get 0% of the contributions until you hit a milestone (typically 3 years), then 100% all at once.
Graded vesting: you get a fixed percentage per year, usually adding up to 100% over 3–6 years.
Federal law (ERISA) caps how slow vesting can be: 3-year cliff or 6-year graded for 401(k) match. Companies can be more generous than that, but not less.
Your own contributions to a 401(k) — the money you defer from your paycheck — are always immediately and 100% vested. Vesting only governs what the company puts in.
Example
A 4-year graded vesting schedule means you keep 25% of employer-matched 401(k) dollars after year 1, 50% after year 2, and so on.
Why this matters
Money that isn't vested isn't yours. Leaving before your vesting cliff means handing back contributions you thought you'd earned.
The catch
Vesting schedules apply to employer contributions, not your own. Your own contributions are always 100% yours from day one. So when someone says "I'm not vested yet," they only mean the match — not their own paycheck deferrals.