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.

RELATED TERMS
  1. Flat Benefit Formula

    A method of calculating an employer's contribution to an employee's ...
  2. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
  3. Savings Incentive Match Plan For ...

    A retirement plan that may be established by employers, including ...
  4. Nonelective Contribution

    A type of contribution an employer chooses to make to each of ...
  5. Unit Benefit Plan

    An employer-sponsored pension plan that provides retirement benefits ...
  6. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
Related Articles
  1. Professionals

    Types and Provisions of Qualified Plans

    Types and Provisions of Qualified Plans
  2. Professionals

    Qualified Retirement Plans

    FINRA/NASAA Series 66: Section 4 Qualified Retirement Plans. This section discusses two types of qualified retirement plans, defined benefit and defined contribution plans.
  3. Retirement

    What's a Defined Contribution Plan?

    A defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
  4. Professionals

    Qualified Retirement Plans

    NASAA Series 65: Section 14 Qualified Retirement Plans. In this section two types of qualified plans: defined benefit and defined contribution plans.
  5. Taxes

    401(k) And Qualified Plans: Contributions

    By Denise ApplebyA qualified plan may be funded by both employer and employee contributions. Contributions are mandatory for some plans and discretionary for others, but the limits on employer ...
  6. Entrepreneurship

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  7. Professionals

    SIMPLE plans

    SIMPLE plans
  8. Term

    What's a Qualified Retirement Plan?

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

    How 401(k) Matching Works

    Find out how employer matching of your 401(k) contributions works, including how employer contributions are calculated and annual contribution limits.
  10. Professionals

    Participation

    All eligible employees must open an IRA to receive the employer’s contribution to the SEP. If the employee does not open an IRA account, the employer must open one for them. The employee ...
RELATED FAQS
  1. 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 >>
  2. What are the contribution limits on a Simple IRA?

    Learn the 2014 contribution limits for investing in a SIMPLE IRA, meant for businesses with 100 or fewer employees to help ... Read Answer >>
  3. 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 >>
  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. When are Simple IRA contributions due?

    Depositing SIMPLE IRA deferred compensation, matching and non-elective contributions when they are due will avoid penalties ... Read Answer >>
  6. How do I report Simple IRA contributions on a W2?

    Learn how Savings Incentive Match for Employees, or SIMPLE IRA, contributions are reported for the participant on Form W2 ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center