The accumulated benefit obligation measures:
A) the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels.
B) an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement.
C) the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels.
D) the shortest possible period for funding to maximize the tax deduction.

Question

Quizplus · Accepted Answer

The definition of accumulated benefit obligation (ABO) is the pension obligation based on the plan formula applied to years of service to date and based on existing salary levels. This means that the ABO measures the pension obligation based on benefits earned by employees up to the measurement date, using current salaries at that time. It does not take into account future salary increases or other assumptions.

The Accumulated Benefit Obligation Measures