The average worker holds 12+ jobs over a career, and defined contribution and defined benefit plans handle that job-hopping in almost opposite ways – one is built to travel with you, the other is built around staying at one employer.
Defined Contribution: Fully Portable, Once Vested
A 401(k) or similar defined contribution plan holds an actual account balance that belongs to the employee. Employee contributions are always 100% vested immediately; employer matching or profit-sharing contributions typically vest on a schedule (commonly 3-year cliff or a graded schedule over 2-6 years). Leaving a job before that money vests means forfeiting the unvested employer portion – but everything vested moves with you, whether left in the old plan, rolled to an IRA, or rolled into a new employer’s plan.
Defined Benefit: Vested, But Frozen and Left Behind
A traditional pension promises a monthly benefit at retirement based on a formula (typically years of service and salary history), not an account balance. Leave before you’re vested (commonly after 3-5 years under current vesting rules) and the promised benefit disappears entirely. Leave after vesting and the benefit doesn’t disappear, but it also doesn’t grow with you – it freezes based on your salary and service at the point you left, then waits, unindexed to inflation in most private plans, until your plan’s normal retirement age.
The Real Cost of a Frozen Pension
Someone who leaves a pension-eligible job at 35 with 10 years of service locks in a benefit calculated on their salary at 35 – not their salary if they’d stayed until 65. Given decades of wage growth between then and retirement, that frozen calculation can be worth dramatically less in real terms than continuing to accrue benefits at a rising salary would have produced, which is the core argument behind why pensions reward long tenure and 401(k)s don’t.
Cash Balance Plans Split the Difference
A cash balance plan is legally a defined benefit plan but is administered and communicated like a defined contribution account, with each employee seeing a hypothetical account balance that grows with pay credits and interest credits. It’s genuinely more portable at job change than a traditional pension – the balance itself can often be rolled into an IRA the way a 401(k) can – but it’s still governed by defined-benefit funding and PBGC insurance rules, not defined-contribution rules. See our full cash balance pension plans guide for how small businesses use these.
What to Actually Check Before You Resign
Request your pension plan’s vesting schedule and your defined-benefit statement showing accrued benefit as of your last day, not an estimate – many plans only send annual statements, so the number you’re picturing may already be stale. For a 401(k), confirm the vesting percentage on employer contributions specifically; a plan can vest quickly on the match but slower (or not at all) on profit-sharing contributions layered on top.
The Bottom Line
A 401(k) balance is yours to move once vested; a pension benefit is frozen in place once you leave, calculated on the salary you had then, not the salary you’d have had if you’d stayed. Anyone weighing a job change with a pension on the table should get the actual accrued-benefit number in writing before assuming it will “catch up” later – it won’t. For what happens to an outstanding 401(k) loan balance specifically when you leave a job, see our 401(k) loan rules guide.
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