Accumulated benefit obligation belongs in a plan-specific employer file. ABO is the actuarial present value of benefits attributed to service through the date using current and past compensation. It includes vested and nonvested accumulated benefits under the plan formula.
Apply it
When the actuary reports ABO of $9.4 million and PBO of $11.2 million for a final-pay plan, the $1.8 million difference can reflect expected future compensation in PBO.
Common mistake
Do not assume that aBO and PBO are interchangeable. ABO excludes expected future pay growth, while PBO includes it when the benefit formula depends on compensation. That error would omit expected compensation growth from a pay-related obligation that requires it.
Keep the boundary clear
ABO can support disclosures and comparisons with plan assets. It does not replace PBO as the pension funded-status obligation, and accounting must not derive it without actuarial support.
Authority
Read ASC 715-30-35-2 for the accumulated benefit obligation measure.
Put the concept to work
Apply this concept
- Explain and apply accumulated benefit obligation within a reconciled employer benefit-plan workpaper using supplied authoritative and actuarial facts.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Defined benefit pension plan — Apply
To apply this concept: Required. This prior concept supplies the plan route or reconciled input required here.