D) 50 percent

A) 100 percent

Correct!

Employee salary deferrals are immediately 100 percent vested — that is, the money that an employee has contributed to the plan cannot be forfeited. When an employee leaves employment, he or she is entitled to those deferrals, plus any investment gains (or minus losses) on his or her deferrals.

In safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions become vested over time, according to a vesting schedule.

According to 401kplanning.org, employers have a choice of two different vesting schedules for employer matching 401(k) contributions. Employers use a schedule in which employees are 100 percent vested in employer contribution after three years of service, called cliff vesting. Under graduated vesting, an employee must be at least 20 percent vested after two years, 40 percent after three years, 60 percent after four years, 80 percent after five years, and 100 percent after six years.

B) 80 percent

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C) 60 percent

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D) 50 percent

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