Conceptually,the employer's current pension obligation if the pension plan is discontinued is the:
A) accrued pension obligation.
B) accumulated benefit obligation.
C) vested benefit obligation.
D) underfunded pension cost.

Question

Quizplus · Accepted Answer

The accumulated benefit obligation represents the present value of benefits earned by employees, based on their current salaries and years of service, as of the measurement date. If the pension plan is discontinued, the accumulated benefit obligation would represent the employer's current pension obligation. The accrued pension obligation represents the present value of benefits earned by employees to date, based on their past service and current salaries. The vested benefit obligation represents the present value of benefits that are guaranteed to employees because they have met certain eligibility requirements. The underfunded pension cost represents the excess of the accumulated benefit obligation over the fair value of plan assets. Therefore, the best choice is B, accumulated benefit obligation, as it represents the current pension obligation if the plan is discontinued.

Conceptually,the Employer's Current Pension Obligation If the Pension Plan Is