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How does vesting work?

Vesting determines when retirement contributions officially belong to you. With IRA-based plans, this is simple. All contributions are always 100 percent yours as soon as they are deposited. IRA-based plans do not use graded vesting or cliff vesting schedules.

Here is how this applies to each IRA type:

Immediate Vesting for All IRA-Based Plans

All contributions, whether made by you or your employer, belong to you immediately. There is no waiting period and no vesting schedule.

• SIMPLE IRAs: Both employee and employer contributions are immediately vested. This includes your salary deferrals, employer matches, and any non-elective employer contributions
• SEP IRAs: All employer contributions are immediately vested. (Note: SEP IRAs are funded entirely by employer contributions. Employees do not make their own contributions to SEP IRAs.)
• Traditional and Roth IRAs: All contributions are always fully vested. Note: These are typically individual retirement accounts funded by the account owner.

Why this matters

With IRA-based plans, the rules are easy to understand. You will never lose employer contributions because you leave a job or switch plans. This keeps administration simple for employers and ensures that employees receive the full value of every contribution.