vest·​ing | \ ˈve-stiŋ How to pronounce vesting (audio) \

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 CenterPoint said the vesting of the stock is a benefit Prochazka would not get apart from the agreement. L.m. Sixel, Houston Chronicle, "CenterPoint gave former CEO millions in cash and stock," 10 Mar. 2020 Nelson, who was non-tendered by the Brewers after the 2019 season, is guaranteed at least $1.25 million in the agreement heavily laden with incentives as well as a mutual vesting option for 2021. Tom Haudricourt, Milwaukee Journal Sentinel, "Right-hander Jimmy Nelson, non-tendered by Brewers after '19 season, signs with Dodgers," 7 Jan. 2020 Keuchel's deal includes a vesting option for 2023 that would bring the total value to $74 million. Ronald Blum, Houston Chronicle, "White Sox, Dallas Keuchel agree to 3-year deal," 21 Dec. 2019 Much of that gain came from executives cashing in stock grants awarded in prior years, including the vesting of restricted shares or the exercise of stock options. San Diego Union-Tribune, "How much did San Diego’s top CEOS make last year? (Hint, their average pay went up 42%)," 14 July 2019 Each have their own set of rules and vesting schedules and each differ in how directly they're tied to performance. Jeanne Sahadi, CNN, "Why CEOs are paid so much," 24 Oct. 2019 In February the bank paid $900m for Solium, a firm that manages share-vesting programmes at technology companies. The Economist, "What kind of bank will Wells Fargo be?," 24 Oct. 2019 That was followed by the departure of Noble as president/CEO in 2016 under a controversial severance agreement crediting her with four months’ employment that brought her to a 10-year retirement vesting threshold. Jon Lender,, "Jon Lender: Momentum grows to curb irregularities and improprieties at quasi-public agencies such as the CT Lottery and Port Authority," 1 Aug. 2019 That means paying them more—minimum salaries will be $25,000, or $19,000 more than MLL's in 2018—giving them equity in the league on a vesting schedule and providing them health benefits, which MLL does not. Ben Reiter,, "Can a New Barnstorming, Player-Centric Lacrosse League Serve as a Template for Other Sports?," 16 Nov. 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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First Known Use of vesting

1944, in the meaning defined above

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Time Traveler for vesting

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The first known use of vesting was in 1944

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Statistics for vesting

Last Updated

13 Mar 2020

Cite this Entry

“Vesting.” Dictionary, Merriam-Webster, Accessed 8 Apr. 2020.

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More Definitions for vesting



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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