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. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  5. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  6. Employer-Sponsored Plan

    A type of benefit plan that an employer offers for the benefit ...
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. Investing Basics

    Enterprise Resource Planning System: A How To

    An ERP system won’t transform poor management into good management, but the real-time business analytics can help make good management even better.
  5. Many of us fantasize about winning a big lottery jackpot. Let’s say that actually happened? What would you do with the money? How would you manage it?
    Professionals

    Tips For Managing A Cash Windfall

    Many of us fantasize about winning a big lottery jackpot. Let’s say that actually happened? What would you do with the money? How would you manage it?
  6. Retirement

    Planning Ahead for 2015's Tax Law Changes

    Increased 401(k) limits can help savers put away more money for retirement in 2015—but some new restrictions are coming for IRAs.
  7. Even though inflation currently seems tame, it's still the worst enemy of retirees. Here are some tips to reduce its impact.
    Professionals

    Tips For Managing Inflation In Retirement

    Even though inflation currently seems tame, it's still the worst enemy of retirees. Here are some tips to reduce its impact.
  8. Retirement

    5 Crucial Tips For Your Retirement Income Planning

    Here are strategies to ensure that your assets have staying power, and that your wealth-making years provide enough funds for your income-taking ones.
  9. Professionals

    Ways To Cut 401(k) Expenses

    You might need to be vigilant and a bit creative to lower overall 401(k) expenses, but the payoff can be big. Here's a quick guide.
  10. Compelled to rollover your retirement plan? Beware of bad advice, unsuitable options and 'toxic' tactics.
    Professionals

    Tread Carefully With Retirement Plan Rollovers

    Compelled to rollover your retirement plan? Beware of bad advice, unsuitable options and 'toxic' tactics.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center