What is ‘Unconditional Vesting’
Pension benefits that are entitled to the employee without any restrictions. The employee is fully entitled to the vested benefits, even if he or she chooses to withdraw plan contributions.
This is opposite to conditional vesting, in which entitlement to vested benefits is contingent upon the plan participant’s contributions being retained in the plan and not withdrawn.
Explaining ‘Unconditional Vesting’
Since a company uses pensions as a tool for long-term retention of employees, its entitlement to present or future pension benefits is contingent upon continued employment with the company for a specified period. Once this condition is satisfied, the pension benefits vest unconditionally with the employee.
Further Reading
- Incentive effects of performance-vested stock options – papers.ssrn.com [PDF]
- The Economic Benefit Doctrine: How an Unconditional Right to a Future Benefit Can Cause a Current Tax Detriment – heinonline.org [PDF]
- Managerial self-interest and strategic repurchases: Evidence from equity vesting schedules – papers.ssrn.com [PDF]
- Cost-efficient performance-vesting equity – www.sciencedirect.com [PDF]
- Equity vesting and investment – academic.oup.com [PDF]
- Equity vesting and managerial myopia – papers.ssrn.com [PDF]
- Attitude strength and vested interest – books.google.com [PDF]
- The long-term consequences of short-term incentives – papers.ssrn.com [PDF]
