However, the money your company puts in your account, known officially as "employer matching contributions," is not automatically vested. Although some employers do grant immediate vesting of their contributions, most use a vesting schedule, based on the amount of time employees have been with the firm.

Employers cannot willy nilly determine when employees will be fully vested. They are bound by the rules laid out in the Pension Protection Act, which requires that all employers use one of two types of vesting schedules: a six year graded schedule or a three year cliff schedule.

If your company has a graded vesting schedule it must be at least as "generous" as the Pension Protection Act requires and that is:

After 1 year of work: 0% is vested

After 2 years of work: 20% is vested

After 3 years of work: 40% is vested

After 4 years of work, 60% is vested

After 5 years of work, 80% is vested

After 6 year 100% is vested.

If you employer uses cliff vesting, you won't be vested until you have worked three years at your company. Then, you'll be vested all at once, as in falling off a cliff! Again, your employer must vest according to the law, although he could be more generous than the minimum requirements which are:

After 1 year of work: 0% is vested

After 2 years of work: 0% is vested

After 3 or more years of work: 100% is vested.

You will need to read your 401(k) documents to find out which schedule your plan uses.

Knowing when you are vested is also important for those thinking of changing jobs. If you leave your company too soon, you could lose part or all of your employer's matching contributions to your 401(k).

For More Information

• Take time to download the Department of Labor's free booklet, Protect Your Pension at: www.dol.gov/ebsa/Publications/protect_your_pension.html.
• The IRS also covers the topic at: www.irs.gov/retirement. (Click on "Pension Protection Act.")