Vested Interest

What Does Vested Interest Mean?

A vested interest refers to a person’s legal entitlement to money or property. In the context of insurance, it often pertains to the stocks or funds an employee is entitled to receive from their employer. These funds or stocks may be designated as retirement benefits, depending on the company’s policy.

Insuranceopedia Explains Vested Interest

A retirement plan includes vested interests, which employees expect to receive upon retirement or at some point during their employment. This can involve a specific amount, or bonds and stocks equivalent to that amount. The period an employee must wait to gain access to these benefits is called the vesting period, while the point at which they can fully acquire these benefits is known as the fully vested time. In the U.S., this process typically takes three to five years.

An example of such a plan is the Employee Stock Ownership Plan (ESOP). Under ESOP, employers can allocate shares of the company to employees, who are also given the opportunity to purchase additional shares. Employees usually gain access to their allocated shares after the vesting period, often coinciding with their retirement.