Vesting (Pension)
The point at which a government employee has earned the right to receive a pension benefit, even if they leave before retirement. Typically requires 5-10 years of service.
How It Works
Before vesting, an employee who leaves receives only their own contributions back (if any). After vesting, they are entitled to a future pension benefit based on their years of service and salary at departure. The vesting period is a key retention tool — employees approaching the vesting cliff have a strong financial incentive to stay. Some pension reforms have extended vesting periods for new employees as a cost-saving measure.
Related Terms
- Defined Benefit Pension — A retirement plan where the employer guarantees a specific monthly payment for life based on years of service and final salary — the traditional government pension.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.