Unit Benefit Plan

Published: | Updated: August 24, 2017

Definition - What does Unit Benefit Plan mean?

A unit benefit plan is a retirement plan initiated and sponsored by an employer. It provides retiring employees an annual benefit based on a certain dollar amount or a percentage of their annual salary for every year of service. Usually, the latter ranges from 1.25 to 2.5%. Like some forms of life insurance and annuities, this pension plan ensures a person has income after retirement.

Insuranceopedia explains Unit Benefit Plan

A unit benefit plan is a form of defined benefit plan intended for retiring employees in a private company. To compute the retirement plan amount, the number of years of service is multiplied by the benefit percentage and the average career salary. For example, an employee who has worked for 30 years with a final salary average of $100,000 on a sponsored unit benefit plan at 2% will receive an annual retirement benefit of $60,000.

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