vesting

noun

vest·ing | \ ˈve-stiŋ

Definition of vesting

: the conveying to an employee of inalienable rights to money contributed by an employer to a pension fund or retirement plan especially in the event of termination of employment prior to the normal retirement age also : the right so conveyed

Examples of vesting in a Sentence

Recent Examples on the Web

Those options aren't worth much in the short term because they can't be recouped for cash until after a predetermined vesting period — typically four years, Forbes writer William Baldwin says. — refinery29.com, "You Are Not Beyoncé. You Do Not Want To Get Paid Only In Equity.," 18 June 2018 And Iovine denied the rumor, particularly that his departure would be motivated by some of his stock vesting in August. — Adam Lashinsky, Fortune, "Data Sheet—Darkness Hits CES Amid the Tech Backlash," 11 Jan. 2018 At retirement, this kind of compensation usually gets cashed out or keeps vesting. — Matt Townsend And Anders Melin, chicagotribune.com, "Tarnished Nike executive is slated to receive $525,000 payout," 20 Mar. 2018 The announcement comes before the final three vesting dates of restricted stock unit awards tied to Facebook’s $22 billion purchase of WhatsApp in 2014. — Tom Metcalf And Anders Melin / Bloomberg, Time, "WhatsApp's CEO Is Suddenly Leaving Facebook. It Could Cost Him $1 Billion," 1 May 2018 At retirement, this kind of compensation usually gets cashed out or keeps vesting. — Matt Townsend And Anders Melin, chicagotribune.com, "Tarnished Nike executive is slated to receive $525,000 payout," 20 Mar. 2018 The Courant calculates compensation as the sum of salary, bonuses, value gained on the exercise of stock options and vesting of stock awards and value of perquisites, such as a retirement plan and personal use of the company’s plane. — Stephen Singer, courant.com, "Aetna: 2017 Compensation For CEO Bertolini Neared $59 Million," 7 Apr. 2018 At retirement, this kind of compensation usually gets cashed out or keeps vesting. — Matt Townsend And Anders Melin, chicagotribune.com, "Tarnished Nike executive is slated to receive $525,000 payout," 20 Mar. 2018 At retirement, this kind of compensation usually gets cashed out or keeps vesting. — Matt Townsend And Anders Melin, chicagotribune.com, "Tarnished Nike executive is slated to receive $525,000 payout," 20 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'vesting.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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The first known use of vesting was in 1944

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More Definitions for vesting

vesting

noun

Financial Definition of vesting

What It Is

Vesting occurs when a financial instrument or account becomes wholly owned by an investor.

How It Works

For example, let's assume that John Doe receives options to buy 2,000 shares of Company XYZ, his employer, for $10 a share. He receives the options as part of his compensation package.

His shares vest over a five-year period, meaning they do not become exercisable for five years. This means John must stay at the company for at least five years before he can exercise his stock options.

Vesting is also common in retirement plans. For example, if John Doe's employer matches the contributions he makes to his retirement plan, those contributions might vest over, say, three years. This means that although the employer agrees to add extra, free money to John's retirement account, that free money doesn't really become his for three years.

Accelerated vesting occurs when a stock option becomes exercisable earlier than originally scheduled. So if Company ABC comes along and buys a 51% stake in Company XYZ, this constitutes a change in control and John Doe's options might automatically vest even though the five-year period has not elapsed. John exercises his options at $10 a share, sells the shares for $20 a share, and walks away with a tidy profit.

Why It Matters

Vesting is a tactic for encouraging loyalty among employees. Vesting can be a windfall to employees, though some tax consequences may exist. Depending on the type of option, for example, John Doe might need to pay taxes on the grant value of the shares ($10) as well as the capital gains on the profit from the sale of those shares.

Source: Investing Answers

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