Unit Benefit Formula


DEFINITION of 'Unit Benefit Formula'

A method of calculating an employer's contribution to an employee's defined benefit plan. The employer calculates the contribution by multiplying an employee's years of service by a percentage of his or her salary.

BREAKING DOWN 'Unit Benefit Formula'

For instance, the company may provide 0.5% or 1% of the employee's salary for each year of service. One advantage of this retirement plan contribution system is that employees are compensated for working longer at a company. However, many employers are reluctant to adopt this system because it requires the services of an actuary and, in turn, higher associated costs for the employer.

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  1. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  2. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  3. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  4. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
  5. Are catch-up contributions included in actual deferral percentage (ADP) testing?

    Though the Internal Revenue Service (IRS) carefully scrutinizes the contributions of highly compensated employees (HCEs) ... Read Full Answer >>
  6. Are Flexible Spending Account (FSA) contributions tax deductible?

    The contributions you make to your Flexible Spending Account (FSA) are not tax-deductible because the accounts are funded ... Read Full Answer >>

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