when an employee leaves a firm before retirement age various factors determine the extent to which they are entitled to their pension balance most important among these is their vesting status vesting refers to the extent to which the employee has control over their retirement assets 
in most cases employees contributions vest immediately and employees with longer tenures will be entitled to a greater share of employers contributions employees can roll over their pension into individual retirement accounts iras after leaving the company for public sector pensions withdrawal rules are determined on a state by state basis private pensions are subject to rules set out in the employee retirement income security act erisa of 1974 erisa and subsequent tax rules outline a complex system of policies regarding vesting and withdrawals from the many variations of defined benefit and contribution plans 1beyond the erisa guidelines employers have the discretion to structure their plans to their own needs when leaving a company it s wise to consider your own needs by educating yourself about your options and obligations about withdrawals from qualified retirement plans in a pension plan defined benefit plan the responsibility for funding an employee s retirement rests on the employer but in a defined contribution plan such as a 401 k the responsibility falls on the employee defined benefit vs defined contribution plansthe defined benefit plan is the most common type of pension plan a defined benefit plan is an employer sponsored retirement plan where employee benefits are computed using a formula that considers several factors such as length of employment and salary history defined benefit plans guarantee the retiree a set cash distribution upon retirement because the employer is responsible for making investment decisions and managing the plan s investments the employer assumes all the investment and planning risks 2in a defined contribution plan like a 401 k or a 403 b employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements the irs has set an annual contribution limit for 401 k s and defined contribution plans for 2023 the maximum contribution limit that an employee can make to a 401 k is 22 500 for 2024 that number increases to 23 000 those who are aged 50 or older can make an additional catch up contribution of 7 500 in both 2023 and 2024 sometimes the sponsoring company will match a portion of employee contributions as an added benefit however the total contribution between the employee and employer cannot exceed 66 000 in 2023 and 69 000 in 2024 for those aged 50 and over there s a 7 500 catch up contribution bringing the total contribution up to 73 500 for 2023 for 2024 the total contribution limit is 76 500 34a defined contribution plan is generally comprised of investments which the employee selects from a curated list of options that often consist of mutual funds there is no way of knowing how much a defined contribution plan will ultimately give the employee upon retiring as contribution levels can change and the returns on the investments may go up and down 