CARD Q064
An employee is fully vested in employer retirement-plan contributions. What does vesting describe?
- Ownership of future contributions before they are made
- The employer’s guarantee of the account’s investment value
- The right to withdraw immediately without tax or restrictions
- A nonforfeitable right to those benefits
A nonforfeitable right to those benefits
Vesting concerns ownership of accrued benefits. It does not by itself make immediate withdrawals permitted or tax-free.
Why each choice is right or wrong
A. Ownership of future contributions before they are made
Incorrect. Vesting concerns accrued benefits, not ownership of contributions not yet made.
B. The employer’s guarantee of the account’s investment value
Incorrect. Ownership rights do not guarantee investment performance.
C. The right to withdraw immediately without tax or restrictions
Incorrect. Withdrawal eligibility and taxation remain separate from vesting.
D. A nonforfeitable right to those benefits
Correct. Vesting concerns ownership of accrued benefits. It does not by itself make immediate withdrawals permitted or tax-free.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.