Projected Benefit Obligation (PBO),
Definition of Projected Benefit Obligation (PBO):
Companies can provide employees with a number of benefits, including a salary, when they retire from work. The Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards No. 87 states that companies must measure and disclose their pension obligations, together with the performance of their plans, at the end of each accounting period. .
A projected benefit obligation (PBO) is an actuarial measurement of what a company will need at the present time to cover future pension liabilities. This measurement is used to determine how much must be paid into a defined benefit pension plan to satisfy all pension entitlements that have been earned by employees up to that date, adjusted for expected future salary increases.
An estimate of the present value of an employees pension which assumes that the employee will continue to work. The actuarial formula used to calculate the Projected Benefit Obligation takes into account future increases in pension contributions that would take place as the employees salary increases. For a company the PBO is an estimate of the pension liability. See also Accumulated Benefit Obligation (ABO).
How to use Projected Benefit Obligation (PBO) in a sentence?
- Projected benefit obligation (PBO) assumes that the plan will not terminate in the foreseeable future and is adjusted to reflect expected compensation in the years ahead.
- A projected benefit obligation (PBO) is an actuarial measurement of what a company will need at the present time to cover future pension liabilities.
- Actuaries are responsible for using the projected benefit obligation (PBO) in order to calculate whether or not pension plans are underfunded.
Meaning of Projected Benefit Obligation (PBO) & Projected Benefit Obligation (PBO) Definition