Unit Benefit Plan

AAA

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.

INVESTOPEDIA EXPLAINS '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. Retirement

    When a person chooses to leave the workforce. The concept of ...
  2. Retirement Contribution

    A monetary contribution to a retirement plan. Retirement contributions ...
  3. Qualified Automatic Contribution ...

    Also known as QACAs, these were established under the Pension ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  6. Employer-Sponsored Plan

    A type of benefit plan that an employer offers for the benefit ...
RELATED FAQS
  1. What's the average hourly wage of waiters and bartenders before tips

    As of 2015, the federal minimum average hourly wage for waiters and bartenders is $2.13 per hour before tip income is included. ... Read Full Answer >>
  2. How much of the asset management industry has moved from traditional managers to ...

    While the exact numbers are difficult to calculate due to variations in measurement and the overall growth of the asset management ... Read Full Answer >>
  3. Places where I can open an IRA Account?

    An individual retirement account can be opened through a range of major financial institutions, including brokerage firms ... Read Full Answer >>
  4. What does a merger or acquisition mean for the target company's employees?

    Suppose one sporting goods manufacturer merges with or acquires another sporting goods manufacturer. Before the merger and ... Read Full Answer >>
  5. What is the difference between a principle agent problem and moral hazard?

    Principal-agent problems and moral hazards are related in that one gives rise to the other. Principal-agent problems occur ... Read Full Answer >>
  6. What is the difference between CI (competitive intelligence) and competitive analysis?

    The difference between competitive intelligence and competitive analysis is that competitive intelligence refers to the understanding ... Read Full Answer >>
Related Articles
  1. Retirement

    Is Your Defined-Benefit Pension Plan Safe?

    Your plan may not last in a rocky market. Find out whether your savings will be affected.
  2. Retirement

    A Primer On Defined-Benefit Pension Plans

    Most of us will rely on a pension plan in the future, so it's best to know the details of the various plans before signing up.
  3. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  4. Economics

    Top 10 Cities For Grads To Get Jobs

    A look at latest employment stats.
  5. Retirement

    Some Tax Considerations For Your Retirement Income

    Even if you don’t plan to retire, it’s still a good idea to think ahead about where to live, your income and how it all interacts with Social Security.
  6. Investing News

    A New Corporate Governance Initiative In Japan

    Expectations are low that Japan can create a corporate governance climate that meets global standards, but a new initiative is aimed at doing just that.
  7. Professionals

    Advisors: Don't Overlook Not-Yet-Rich Millennials

    Financial advisors looking to grow their practices should focus on potential high-net-worth millennials.
  8. Retirement

    Top 10 Mistakes To Avoid On Your IRA

    IRA rules are complicated. It's easy to make mistakes – and they can cost you big time.
  9. Retirement

    Beware Of Taking Out A Pension Advance Loan

    Avoid taking out an advance against your pension. Interest on these loans is high and you could end up taking a huge tax hit – and even lose your pension!
  10. Retirement

    Converting A Traditional IRA To A Roth

    When is it a good idea to convert traditional IRA funds into Roth IRA funds? And when does it not make sense?

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center