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THE YALE LAW JOURNAL FORUM
SEPTEMBER 27, 2024
The Effects of 401(k) Vesting Schedules - in Numbers
Samantha J. Prince, Timothy G. Azizkhan, Cassidy R. Prince &
Luke Gorman
ABSTRACT. Many Americans terminate employment, voluntarily or involuntarily, prior to
vesting in their 401(k) plans. This costs them a lot of money; it also saves companies a lot of
money. Vesting schedules used by some 4o1(k) plans cause plan participants to forfeit significant
portions of their compensation- employer contributions made on their behalf- that should be
increasing their retirement savings. This money is recycled by such plans to offset their employer
contribution obligations and other costs.
We analyzed data from Form 55oos to identify trends in and implications of vesting schedule use
by 408 single-employer 401(k) plans over the five-year period of 2018-2022. Our findings show
that the number of participants terminated before full vesting is growing rapidly. Further, we an-
alyzed data from Form 55oos for 909 single-employer 401(k) plans for 2022. We found that 1.8
million plan participants forfeited compensation because they terminated employment (voluntar-
ily or involuntarily) without being fully vested in their employer plan contributions. Amazon's and
Home Depot's 401(k) plans have had the most affected participants for the past three years. Addi-
tionally, in the 909 plans we analyzed, we found that forfeitures used in 2022 amounted to a stag-
gering $1.5 billion, most of which was used to reduce an employer's contribution obligation. Our
findings highlight the magnitude of the implications of 401(k) vesting schedule use and identify
key companies whose plans have the most affected participants and the highest amounts of forfei-
tures at their disposal.
INTRODUCTION
A majority of Americans do not have enough money saved to support them-
selves through retirement.' Accumulating retirement savings is no easy task:
1. Dan Doonan, Americans Are Worried About Retirement Savings, and They Should Be, FORBES
(Apr. 11, 2024, 5:22 PM EDT), https://www.forbes.com/sites/dandoonan/2o24/o4/11/amer-
icans-are-worried-about-retirement-savings-and-they-should-be [https://perma.cc/C6YJ-
NWSK]; New AARP Survey: 1 in 5Americans Ages 5o+ Have No Retirement Savings and over
Half Worry They Will Not Have Enough to Last in Retirement, AARP (Apr. 24, 2024),](ViewImageLocal?handle=hein.journals/yljfor134&div=1&collection=&method=preview&ext=.png&size=3)
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