PensionBee Analysis Finds Outdated 401(k) Vesting Rules Can Cost Savers Over $61,000

NEW YORK, Aug. 28, 2025 (GLOBE NEWSWIRE) -- Each year, Americans forfeit more than $1 billion in employer 401(k) contributions simply by changing jobs. Many don’t realize what they’re losing.

Employer matches on 401(k) contributions are often considered “free money.” In a landscape where saving for retirement falls almost entirely on the shoulders of individuals, 401(k) matches represent critical employer support.

Roughly half of 401(k) plans offer immediate vesting, giving employees full ownership of their funds right away. The others use a vesting schedule, where employees gain ownership of employer matching contributions over a period set by their employer.

The common assumption is that vesting schedules boost employee retention. However, data shows that most employees are unaware of whether their 401(k) matches are vested, with only 33% of respondents in one major report able to correctly state whether they were in a plan with a vesting schedule.

While employees lose out, someone else wins.

Employers may directly benefit from unvested funds, known as forfeitures. Under ERISA, forfeitures are supposed to offset plan costs for participants, but recent lawsuits allege that some major employers are using former employees' funds to subsidize their matching obligations for future employees.

The misalignment is clear: 401(k) matching is marketed as a benefit to employees, but the fine print means the company can keep the money unless you stay long enough, a detail often buried, poorly communicated, or ignored.

But what does this mean for individual workers? New PensionBee analysis modeled the cost of incomplete vesting schedules on individual retirement savers, revealing that even partial 401(k) forfeitures can add up to over $61,000 lost by retirement.

A Crisis Hiding in Plain Sight

Under typical vesting schedules, employees must remain with an employer for three to five years to receive their full 401(k) match. With average job tenure declining, workers are at increased risk of forfeiting a significant portion of their retirement benefits each time they switch jobs.

America's youngest workers and new employees are most at risk. The Investment Company Institute reported that in 2022, a striking 40% of 401(k) plan participants were in their twenties or thirties, with an additional 23% in their forties. Even more telling, 48% of all 401(k) participants had five or fewer years of tenure with their current employer, and one-quarter were recent hires with two or fewer years of service.

The True Cost of What You Don't Know

PensionBee’s case study modeled the impact of an illustrative vesting schedule on an individual who:

Earns $50,000 annually
Receives a 5% 401(k) employer match through a graded vesting schedule that grants one-third of benefits each year over three years
Job hops approximately every three years before fully vesting, resulting in an ‘invisible loss’ of $2,500 at each move
Holds 11 jobs over 36 years, just below the national average

While the employee retains $5,000 of a $7,500 employer match at each job change, the compounded loss of $2,500 adds up. Even without factoring in salary increases or cliff vesting schedules, which don’t grant a penny if you leave before the end of your schedule, the analysis reveals this common retirement mistake can cost over $61,000 by retirement.

Table 1: Future Cost of Lost 401(k) Contributions*

Account		1		2		3		4		5		6		7		8		9		10		11
Duration		33		30		27		24		21		18		15		12		9		6		3
Cost per account	$	9,565	$	8,467	$	7,494	$	6,634	$	5,872	$	5,198	$	4,601	$	4,072	$	3,605	$	3,191	$	2,824

The table above demonstrates how these losses compound over time:

$2,500 in lost contributions from 33 years ago would be worth $9,565 today if it had been invested* and allowed to grow
Even $2,500 in lost contributions from just 3 years ago would cost $2,824 today
The cumulative cost across all accounts totals $61,523

This erosion happens because:

Each loss eliminates principal that could have been invested
Workers lose decades of compound growth that would have occurred on those contributions
The impact multiplies across job changes throughout a career

ERISA’s Outdated Framework

While ERISA requires that employers communicate vesting schedules, the mandate is limited. The law requires employers to share this information once during onboarding, through a lengthy Summary Plan Description (SPD). After that point, plan sponsors are not required to send another update for 10 years, or 5 if there are material changes to the plan.

Not only are employees likely to miss the initial notification, but without consistent follow-up communication, they are unlikely to weigh the loss of their unvested funds when considering career moves. It’s no surprise, then, that Americans may reach critical vesting milestones unaware of their status or the financial consequences of not accounting for it. Or that forfeitures occur in as many as 30% of all job separations.

What Employees Can Do

To protect their retirement savings from vesting forfeitures and fee erosion, employees should:

Confirm vesting schedules: Review your SPD and request additional information as needed.
Consolidate old 401(k) accounts: Roll over previous employer accounts into a single IRA to simplify management of your savings.
Time job changes strategically: Factor the cost of 401(k) forfeitures into career decisions.

"It's hard enough to accumulate retirement savings without sneaky rules quietly undermining your nest egg," said Romi Savova, CEO of PensionBee. "When nearly half of 401(k) participants have short tenure and face complex vesting rules with minimal disclosure, we’re left with a system where retirement plans don’t fulfill their intention or potential.”

About PensionBee

PensionBee is a leading online retirement provider, helping people easily consolidate, manage, and grow their retirement savings. The company manages approximately $8 billion in assets and serves over 275,000 customers globally, with a focus on simplicity, transparency, and accessibility.

Media Contact:
Adela McVicar
SR PR Manager
Adela.mcvicar@pensionbee.com

*Disclosure for Table 1

Your investment can go down as well as up. This data is provided solely for informational and educational purposes. The values in this table represent hypothetical scenarios of missed investment growth. All investment calculations assume a 5% annual return with an .85% annual fee, compounded over 36 years.

_{PensionBee Inc. is registered with the Securities and Exchange Commission as an investment adviser. We do not provide in-person advice. PensionBee Inc (Delaware Registration Number SR20241105406 ) is located on 85 Broad Street, New York, New York, 10004.}

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.