Accumulated Benefit Obligation

AAA

DEFINITION of 'Accumulated Benefit Obligation'

An approximate measure of a company's pension plan liability. The accumulated benefit obligation (ABO) is estimated based on the assumption that the pension plan is to be terminated immediately; it does not consider any future salary increases. This differs from the projected benefit obligation, which assumes that the pension plan is ongoing, and thus accounts for future salary increases.

INVESTOPEDIA EXPLAINS 'Accumulated Benefit Obligation'

Looking over a company's pension accounting can be an important piece of analysis for investors. Pension accounting is an area in which a company can be aggressive in many ways, such as the discount rate used for future pension obligations.

RELATED TERMS
  1. Benefit Allowance

    Money that a company or government agency provides to an employee ...
  2. Pension Shortfall

    A situation in which a company offering employees a defined benefit ...
  3. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  4. Pension Benefit Guaranty Corporation ...

    A non-profit corporation that functions under the jurisdiction ...
  5. Pension Fund

    A fund established by an employer to facilitate and organize ...
  6. Pension Protection Act Of 2006 ...

    An act of legislation that makes a large number of reforms to ...
Related Articles
  1. Keeping Track Of Retirement Plan Assets
    Retirement

    Keeping Track Of Retirement Plan Assets

  2. The Investing Risk Of Underfunded Pension ...
    Retirement

    The Investing Risk Of Underfunded Pension ...

  3. A Primer On Defined-Benefit Pension ...
    Retirement

    A Primer On Defined-Benefit Pension ...

  4. How To Evaluate Pension Risk By Analyzing ...
    Investing

    How To Evaluate Pension Risk By Analyzing ...

comments powered by Disqus
Hot Definitions
  1. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  4. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  5. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center