Question

The projected benefit obligation (PBO) is best described as thea. Present value of benefits accrued to date based on future salary levels.b. Present value of benefits accrued to date based on current salary levels.c. Increase in retroactive benefits at the date of the amendment of the plan.d. Amount of the adjustment necessary to reflect the difference between actual and estimated actuarial returns.

Answer 1

Answer: the correct answer is a. Present value of benefits accrued to date based on future salary levels.

Explanation: The actuarial formula used to calculate the Projected Benefit Obligation takes into account future increases in pension contributions that would take place as the employee's salary increases. For a company the PBO is an estimate of the pension liability.