What happens to employer contributions if an employee leaves before being fully vested?

When an employee leaves a job and is not fully vested, the employer contributions made to their retirement plan typically revert back to the employer. Vesting refers to the employee's right to keep the employer contributions based on their length of service. If the employee has not met the vesting requirements outlined in the plan, the employer is entitled to retrieve those funds. This is a standard practice in retirement plans to encourage employee retention and reward those who remain with the company for a longer period.

In contrast, the other options do not accurately reflect the typical outcomes for unvested contributions. For instance, leaving the contributions in the employee's account or rolling them over to a new spouse’s account would not align with the rules governing unvested employer contributions. Additionally, converting the contributions to employee contributions does not apply since employer contributions are distinct and carry different vesting rules than employee contributions. Thus, the correct outcome upon leaving before becoming fully vested is that the employer retains the contributions made on the employee's behalf.