Unit Benefit

What Does Unit Benefit Mean?

A unit benefit refers to an employee’s retirement benefit in a defined benefit plan or other annuity. It may either be based on a fixed dollar amount or a percentage of compensation multiplied by the number of years of service. For an annuity, it would be based on some function of the amount contributed and the number of contribution years.

Insuranceopedia Explains Unit Benefit

For example, an employee may be entitled to receive 2 percent of the average of three consecutive highest salary years for every year of service. This would mean an employee averaging $60,000 who has worked 35 years for the company would receive $42,000 in annual retirement benefits. Therefore, a unit benefit encourages an employee to stay at a company to enjoy higher benefits upon retiring.