Investopedia

Continue to Site »

Pension Benefit Obligation - PBO

Filed Under » , , , ,
Dictionary Says

Definition of 'Pension Benefit Obligation - PBO'

An accounting term used to describe the amount of money a company must pay into a defined-benefit pension plan to satisfy all pension entitlements that have been earned by employees up to that date. The pension benefit obligation (PBO) is calculated by an actuary, who determines the benefits needed through a present value calculation.
Investopedia Says

Investopedia explains 'Pension Benefit Obligation - PBO'

A pension benefit obligation is a calculation of the total amount due to employees in the pension fund for all of the past service completed up to that date. Some of the assumptions an actuary will use to calculate the PBO include, but are not limited to, the estimated remaining service life of employees, salary raises and the mortality rates of employees.

Although a PBO is classified as a liability on the balance sheet, there is considerable criticism about whether it meets the predefined criteria of a liability, which are:

a) There is a responsibility to surrender an asset from the result of the transaction(s) taking place at a specified future date.
b) The company must surrender assets for the liability at some future point in time.
c) The transaction resulting in the liability has already taken place.

Articles Of Interest

  1.

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.

  2. 7 Signs Your Pension Fund Is In Trouble

    Even if you're lucky enough to have a pension plan, you can't assume it'll pay out.

  3. The Defined-Benefit Plan's Many Problems

    The shift in retirement plan schemes - from defined benefit plans to defined contribution plans - raises some important issues.

  4. Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.

  5. Can I leave my pension to my spouse when I pass away?

    In most cases, an individual with a pension plan should have the option to leave at least a portion of his or her pension to a surviving spouse and/or child. Oftentimes, this can be done by purchasing ...

  6. How To Start Saving For Retirement

    If you establish these money-saving habits and patiently allow your wealth to build, you will be taking some huge steps forward in making your financial future more secure.

  7. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".

  8. An Introduction To The Keogh Retirement Plan

    Learn more about this popular defined-contribution retirement plan that many business owners, proprietors, and self-employed people can benefit from.

  9. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  10. How To Buy Annuities (And When Not To)

    Annuities are complicated products that require some basic homework to be done before requesting quotes. Retirees will want to think about how they envisage their lifestyle and even their potential ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center