401(k) Vesting Schedule: What You Lose When You Leave

When you leave a job, you can roll over every dollar in your 401(k) — but only if that dollar is vested. Your own contributions are 100% vested from day one. Employer contributions (matching, profit-sharing) are almost always subject to a vesting schedule. Leave before you're fully vested and you forfeit the unvested portion permanently. It never rolls over. It never comes back.

Vested vs. unvested: what the distinction means

"Vesting" is the process by which employer contributions become permanently yours. Until a dollar is vested, it belongs to the plan — you have a conditional right to it that depends on how long you stay. Leave early and you forfeit the unvested portion, which goes into a forfeiture account and is used to reduce the company's future contributions or cover plan expenses.

What is always 100% vested from day one:

• Your own salary deferrals — every payroll contribution you make.¹
• After-tax (non-Roth) voluntary contributions you make.
• Roth 401(k) contributions — yours immediately.
• Employer contributions under a safe harbor 401(k) design (see below).

What is subject to a vesting schedule:

• Employer matching contributions in a traditional (non-safe harbor) plan.
• Employer profit-sharing contributions.
• Employer non-elective contributions (other than safe harbor).

The three vesting schedules

ERISA and IRC § 411 establish the minimum vesting rates employers must meet. Plans can always vest faster — many employers use immediate vesting to attract and retain employees. But they can never vest slower than the ERISA minimums.²

A "year of service" for vesting purposes means a plan year in which you complete at least 1,000 hours of service. Full-time employees almost always clear this threshold. Part-time employees may not — see SECURE 2.0 rules below.

Unvested 401(k) match calculator

Enter your situation to see how much employer match you'd leave on the table if you separated today.

How a "year of service" is counted

A plan year in which you work at least 1,000 hours counts as a year of service for vesting purposes under IRC § 411(a)(5).³ For a full-time employee working 40 hours/week, you cross 1,000 hours in about 25 weeks — well before the year is out. For part-time employees, the threshold may not be reached in a given year, which slows vesting progress.

Plans are allowed to exclude your first year of service for vesting counting in some limited circumstances, but for 401(k) plans specifically, the eligibility rules that apply before you can start contributing do not override the vesting year counting once you are a participant.

Safe harbor 401(k) plans: immediate vesting required

A safe harbor 401(k) avoids annual nondiscrimination testing by meeting specific contribution and vesting requirements. Safe harbor matching contributions must be immediately 100% vested — the plan cannot impose a cliff or graded schedule on these amounts.⁴

Common safe harbor designs:

• Basic match: 100% of first 3% of deferrals + 50% of next 2% (effective 4% match at 5% deferral). Must be immediately vested.
• Enhanced match: Any formula at least as generous as the basic match, immediately vested.
• Non-elective: 3% of compensation for all eligible employees regardless of whether they contribute. Immediately vested.

If you're uncertain whether your plan is safe harbor, look for language in your Summary Plan Description (SPD) about "safe harbor contributions" or ask HR. You can also check whether the company skips 401(k) nondiscrimination testing — that's a signal of safe harbor status.

SECURE 2.0: long-term part-time employees

SECURE 2.0 Act § 112 (effective 2025) required 401(k) plans to allow long-term part-time employees to participate after completing two consecutive years with at least 500 hours each (down from three years under SECURE 1.0).⁵ Years of service (500+ hours) earned in those years must also count toward vesting — plans cannot ignore them when calculating the graded or cliff vesting percentage.

For part-time workers who are newly eligible to participate: your 500-hour years count for vesting even though you may not have cleared 1,000 hours. This means your vesting progress may be further along than you'd expect.

How vesting limits what you can roll over

When you leave a job, you submit a distribution request to the plan administrator. The plan will distribute only your vested balance — your own deferrals plus the vested portion of employer contributions. Unvested employer contributions are forfeited at the moment of distribution and go to the plan's forfeiture account. You cannot roll over what isn't vested.

The vested amount that rolls over carries no tax consequence if transferred directly (trustee-to-trustee). For the mechanics of executing the actual rollover, see our step-by-step 401(k) to IRA rollover guide.

Three real scenarios

Scenario 1: Marketing director leaving at year 2.5 — cliff vesting costs her $31,200

She's been at a retail company for two and a half years. Her employer matches 100% of the first 6% of salary, and she earns $130,000 and has maxed her deferral. Over two and a half years, her employer has deposited about $31,200 in matching contributions into her account. The plan uses a 3-year cliff schedule.

Because she hasn't completed year three, she is 0% vested in the employer match. She rolls over her $52,000 in personal contributions to a rollover IRA — completely tax-free. The $31,200 in unvested employer match stays in the plan's forfeiture account. If she had waited six more months to complete year three, the full $31,200 would have been hers to roll over.

The math on waiting: $31,200 invested at 7% annual return for 30 years grows to approximately $237,000. The decision to leave six months early cost her the equivalent of $237,000 in retirement assets.

Scenario 2: Software engineer at year 4 — graded vesting, he keeps 60%

He's been at a tech company for four full years. The plan uses a 6-year graded schedule and the employer match totals $88,000 in his account. At year 4, he's 60% vested.

Vested employer balance he can roll over: $88,000 × 60% = $52,800. Forfeited: $35,200. His total rollover to a new employer's 401(k) is $52,800 in employer contributions plus his full personal deferral balance. He's aware that staying two more years would have reached 100% vesting and preserved the additional $35,200.

Scenario 3: Hospital administrator retiring at year 12 — fully vested, full rollover

She's worked at the same hospital system for 12 years and is retiring at 64. She completed year three long ago and has been 100% vested in employer contributions for nearly a decade. Her 401(k) balance is $890,000 — $220,000 employer match, $670,000 personal deferrals and growth. The entire $890,000 is vested and eligible for rollover. She follows the rollover at retirement framework to manage timing, Roth conversions, and IRMAA cliffs before the money moves.

Sources

1. IRC § 411(a)(1) — Minimum Vesting Standards. Employee salary deferrals must be 100% vested immediately upon contribution. Employer contributions are subject to the vesting schedules in § 411(a)(2). Confirmed applicable to 401(k) plans under § 411(a).
2. DOL — Vesting in Your Employer's Plan. ERISA § 203 and IRC § 411 establish minimum vesting standards for defined contribution plans: 3-year cliff or 6-year graded (20% increments). Plans can always vest faster. Verified 2026.
3. IRS — Vesting in Retirement Plans. IRC § 411(a)(5): a "year of service" for vesting purposes means a plan year in which the participant completes at least 1,000 hours of service. Plans may use an elapsed-time method as an alternative.
4. IRS — Safe Harbor 401(k) Plans. IRC § 401(k)(12) and (13) require that safe harbor matching and non-elective contributions vest immediately (100%) upon contribution. Plans that use QACA may apply a 2-year cliff to safe harbor non-elective contributions but not matching.
5. IRS — SECURE 2.0 Long-Term Part-Time Employee Rules. SECURE 2.0 § 112 (effective plan years beginning after Dec. 31, 2024): 401(k) plans must allow participation for employees completing 2 consecutive years of 500+ hours. Years of 500+ hours service must be credited toward vesting. Prior years from SECURE 1.0 (3-year rule) count as well.

Vesting schedule minimums under IRC § 411 and ERISA § 203 are permanent law unchanged by SECURE 2.0, OBBBA, or the Social Security Fairness Act. SECURE 2.0 § 112 changed eligibility and vesting credit rules for long-term part-time employees effective 2025. Values and rules verified May 2026.