An example of cliff vesting is when an employee becomes fully vested after five years of full-time employment. The vesting schedule for the employers' contribution to private retirement plans is mandated by the federal government. Employers may use vesting schedules in an attempt to retain talent and reduce attrition costs. Employees who leave a job often lose all the benefits that were not yet vested at the time of departure, so the employees may be incentivized to remain with the company longer to receive all benefits.
Investment dictionary. Academic. 2012.
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