DEFINITION of 'Unit Benefit Plan'

An employer-sponsored pension plan that provides retirement benefits based on a dollar amount or, more typically, a percentage of the employee's earnings for each year of service. A unit benefit plan is usually based on a percentage ranging from 1.25-2.5%. When the employee reaches retirement, his or her years of service are multiplied by the percentage multiplied by the career average salary to determine the employee's annual retirement benefit.

BREAKING DOWN 'Unit Benefit Plan'

A unit benefit plan provides retirement benefits based on the employee's compensation and how long he or she has been employed by the company. If an employee has 35 years of service, for example, with final average earnings of $120,000 and the unit benefit plan percentage is 2.0%, the employee's annual retirement benefit would be calculated as follows:


Years * average earnings * compensation percentage = annual retirement benefit.


Applying the above example to the calculation yields: 35 * 120,000 *.02 = $84,000

RELATED TERMS
  1. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  2. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  3. Employer-Sponsored Plan

    A type of benefit plan that an employer offers for the benefit ...
  4. Unit Benefit Formula

    A method of calculating an employer's contribution to an employee's ...
  5. Benefit Allocation Method

    The benefit allocation method is a means of funding a pension ...
  6. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
Related Articles
  1. Retirement

    5 Lesser-Known Retirement And Benefit Plans

    These plans aren't widely used, but they fill a specific niche for employees in certain situations.
  2. Retirement

    Understanding Defined Benefit Pension Plans

    An employer-sponsored retirement plan where employee benefits are based on a formula using factors such as salary history and duration of employment.
  3. Retirement

    How Does a Pension Plan Work?

    A pension plan is a savings plan maintained by an employer on behalf of its employees for their retirement.
  4. Financial Advisor

    What's a Qualified Retirement Plan?

    Employers establish qualified retirement plans to help their employees save money.
  5. Retirement

    Florida's Surprisingly Flexible State Retirement System

    Retired Florida employees can choose a 401(k)-style investment plan or a traditional pension.
  6. Financial Advisor

    The 401(k) and Qualified Plans Tutorial

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  7. Retirement

    Chipping Away At The Pension Freeze Trend

    Learn five steps that'll put your retirement back into your own hands.
  8. Retirement

    What You Didn't Know About Utah's Retirement Systems

    While Utah isn’t quite as generous with employee retirement benefits as it once was, its contribution rate for new hires is still very competitive.
  9. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  10. Retirement

    This Is Why Your Employer Should Offer a 401(k)

    Understand the unique benefits that come with a small business offering a retirement savings plan such as a 401(k) to current and future employees.
RELATED FAQS
  1. How does a defined benefit pension plan differ from a defined contribution plan?

    Learn the differences between defined benefit plans and defined contribution plans when reviewing employer-sponsored qualified ... Read Answer >>
  2. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ... Read Answer >>
  3. How do I "vest" something?

    Vesting is a term usually related to pension plans that some employer's provide to their employees.An employer may make contributions ... Read Answer >>
  4. How can an entrepreneur save for retirement?

    Learn about the retirement savings plan options for entrepreneurs and small business owners, including administration and ... Read Answer >>
  5. What is the difference between qualified and non-qualified plans?

    Qualified and non-qualified retirement plans are created by employers with the intent of benefiting employees. The Employee ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center