Pension Benefit Obligation - PBO
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 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. |
Related Definitions
Articles Of Interest
-
The Investing Risk Of Underfunded Pension Plans
Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan. -
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. -
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. -
Pension Plans: Pain Or Pleasure?
Employees have a love/hate relationship with this retirement option. -
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 ... -
Should You Buy An Annuity?
For many cash strapped seniors an annuity sounds like the perfect solution. And it can be if you think you’ll outlive your mortality date. The only trouble is that the insurance companies offering ... -
Analyzing The Best Retirement Plans And Investment Options
Understanding the various retirement investments - from annuities to 401(k)s and everything in between - is crucial to reaching your retirement goals. Here, we examined many of the popular investments ... -
The 10 Worst Financial Decisions You Can Make In Retirement
In this time of fiscal uncertainty, there are many financial decisions that can make or break you during your formative years. -
A Day In The Life Of A Public Accountant
Here's an inside look at the workdays of two experienced CPAs, to give you an idea of what it might be like to pursue a career as a public accountant. -
Mandatory Pension Savings: Should Employers And Employees Be Forced To Make Contributions?
The scale of the pension crisis in the U.S. cannot be denied, and there's a growing movement that supports the mandatory pension system that's been created in Australia and other parts of the ...
Free Annual Reports