Pensions

Question 1

Pensions

What is the difference between the PBO and the ABO?

Answer 1

Accumulated benefit obligation is based upon PRIOR compensation. Project benefit obligation is based on FUTURE compensation.

Question 2

Pensions

What are the five components that either increase or decrease the amount of pension expense recognized during the period?

Answer 2

Pension Expense
PRIUS

1. Prior Service Cost Amortization
2. Return on Plan Assets
3. Interest Cost
4. Unexpected Losses or Gains
5. Service Cost

Question 3

Pensions

State the Pension Expense Formula

Answer 3

1. • Prior Service Cost Amortization
2. • Return on Plan Assets (Estimated)
3. • Interest
     (Beginning PBO x Interest Rate)
4. • Unexpected Losses or (-) Gains
5. • Service Cost
     (As employees work, the PBO increases)