Vested Benefit Obligation - VBO

AAA

DEFINITION of 'Vested Benefit Obligation - VBO'

The actuarial present value of pension plan benefits belonging to employees of an organization. The vested benefit obligation (VBO) is one measure of a pension fund's liability. The VBO only considers benefits that have vested in an employee, as opposed to the accumulated benefit obligation (ABO), which represents the present value of any benefits, whether vested or not.

INVESTOPEDIA EXPLAINS 'Vested Benefit Obligation - VBO'

Since minimum vesting requirements are generally five years, the values of the vested benefit obligation and accumulated benefit obligation are very close in most pension plans. While the ABO and VBO values are required to be disclosed at fiscal year-end, in cases where the values are almost similar, companies' financial statements show the ABO value and state that the VBO and ABO values are not materially different.

RELATED TERMS
  1. Vesting

    The process by which employees accrue non-forfeitable rights ...
  2. Fully Vested

    A person's right to the full amount of some type of benefit, ...
  3. Graduated Vesting

    The accelerated benefits employees receive as they increase the ...
  4. Accumulated Benefit Obligation

    An approximate measure of a company's pension plan liability. ...
  5. Pension Benefit Obligation - PBO

    An accounting term used to describe the amount of money a company ...
  6. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
RELATED FAQS
  1. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... Read Full Answer >>
  2. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
  3. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  4. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  5. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  6. What types of investments are allowed in a provident fund?

    Different provident funds have different investment rules and restrictions. The allowable investments in an Indian provident ... Read Full Answer >>
Related Articles
  1. Retirement

    3 Reasons To Use An Employer-Sponsored Retirement Plan

    If you aren't participating in your employer-sponsored retirement plan, you're missing out! Learn the benefits.
  2. Retirement

    Combining Your Plan Assets? Not So Fast!

    You might reduce the costs of maintaining more than one account, but you could also be forfeiting tax benefits.
  3. Retirement

    The Investing Risk Of Underfunded Pension Plans

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

    A Primer On Defined-Benefit Pension Plans

    Most of us will rely on a pension plan in the future, so it's best to know the details of the various plans before signing up.
  5. Retirement

    Lump Sum Versus Regular Pension Payments

    If you're about to retire, you may be facing this dilemma soon. Find out what your options are.
  6. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  7. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  8. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  9. Personal Finance

    Affordable Ways For Upgrading Your Home

    Upgrading your home doesn’t have to be an expensive chore. Here we give you 8 affordable ways to increase its appeal.
  10. Retirement

    Millennials: Retire With $1,000,000 --Here's How

    It is possible for Millennials to retire with $1,000,000, if they take the right steps and make the necessary sacrifices now.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!