Q: Are there any legal requirements regarding minimum vesting schedules for employer sponsored retirement plans?  

The two statutory minimum vesting schedules are five-year cliff vesting or seven year graded vesting, Under cliff vesting, after 5 years of employment, employees must be 100% vested. Under graded vesting, an employee who is credited with three years of service must be 20 percent vested. The vesting must increase 20 percent for each additional year of service until 100% vesting is reached with seven years of service. Plans may have more liberal vesting schedules than the two identified in the Code as long as the vested percentage in any given year is at least as favorable as permitted under one of these statutory schedules

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