If a company increases its expected return on plan assets this year, the effect would be to:

I. increase plan assets.
II. decrease PBO.
III. decrease pension expense.
IV. decrease minimum liability.

A)I, II, and IV
B)I and IV
C)III and IV
D)III only

Question

If a company increases its expected return on plan assets this year, the effect would be to:

I. increase plan assets.
II. decrease PBO.
III. decrease pension expense.
IV. decrease minimum liability.

A)I, II, and IV
B)I and IV
C)III and IV
D)III only

Quizplus · Accepted Answer

Increasing the expected return on plan assets would decrease pension expense by reducing the amount the company expects to contribute to the plan. It does not directly affect the plan assets, PBO (Projected Benefit Obligation), or minimum liability.

If a Company Increases Its Expected Return on Plan Assets