These refer to benefits that employees are entitled to even if they leave the firm before retirement. The employee is given a legal claim on his or her pension rights when he or she becomes vested. This means that even if the employee leaves the firm, he or she is still entitled to receive a pension from the firm on retirement. There are various types of vesting formulas, which determine when an employee becomes vested. Most formulas are based on the employee’s length of service. For example, if a firm’s pension policy states that an employee can become vested after working for the firm for nine years, then after nine years of working for the firm the employee is entitled to receive a pension. From the firm’s perspective, the vesting formula may lower the cost of the pension plan because employees who leave the company before they become vested are not entitled to receive any pension benefits.