This kind of plan also may be referred to as a unit benefit plan. These terms refer to a plan in which employees are promised that upon retirement they will receive a specific amount of money according to a formula, which may be some calculation based on how long an employee worked for a company and how much he or she earned. This kind of plan refers to one for which the employer makes regular contributions of a specified amount of money. In contrast to a defined benefit plan, it does not promise the employees any specific amount of retirement benefits. The employee's retirement benefit will depend on how much was contributed to his or her account and how the plan's investments performed over the years.
Different plans have different requirements about who is entitled to participate in a plan.
These eligibility requirements can include the employee's age or how long he or she has been employed by the company. Generally, an employee is eligible when he or she turns twenty-one or has been employed for one year. This plan primarily is funded by the company's own stock and does not depend on whether the company has made a profit. You will see and hear this word a lot. Employee welfare plan .