Final answer:
Vesting is the process of becoming entitled to retirement benefits, with the most restrictive schedules being either a 5-year cliff or 7-year graded for defined benefit plans. Defined contribution plans are now more common and offer benefits like employer contributions and portability.
Step-by-step explanation:
The process of becoming legally entitled to retirement benefits is known as vesting. The most restrictive schedule for this process for defined benefit plans is either a 5-year cliff or a 7-year graded schedule. The correct answer is a) Vesting. Defined benefit plans, also known as pensions, traditionally offer a fixed dollar amount per year upon retirement. However, defined contribution plans, like 401(k)s and 403(b)s, have become more prevalent. These newer plans feature contributions from both employers and employees, tax deferral, and the portability of the retirement account when changing jobs. These contributions are invested, and if they earn real rates of return, the challenge of inflation that affects traditional pensions is mitigated.