Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

What is defined as the right an employee earns through length of service to receive employer-contributed benefits?

1. Clerical Rights

2. Vesting

3. Entitlements

4. Gratuity

The correct answer is: Vesting

The term that is defined as the right an employee earns through length of service to receive employer-contributed benefits is vesting. Vesting refers to the process by which an employee earns the right to receive benefits from employer-sponsored plans, such as pension plans or retirement accounts, based on the duration of their service with the company. Typically, once an employee is vested, they have a permanent right to the benefits accrued, even if they leave the company. In the context of retirement plans, for example, vesting schedules are often implemented to encourage employees to remain with the employer for a certain period before they have full claim to the employer's contributions made on their behalf. This concept is crucial for employees to understand as it affects their financial security and planning for the future. Other terms mentioned, such as clerical rights, entitlements, and gratuity, do not specifically address the concept of accumulating rights to employer-contributed benefits over time. Instead, they may refer to various forms of benefits or rights employees have, but not specifically the earned right tied to longevity in service which is captured by vesting.