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What is the main difference between the accumulated benefit obligation (ABO) and the projected benefit obligation (PBO)?

The main difference between the ABO and PBO is the salary information used to estimate the obligation. The ABO uses current salary information while the PBO uses projected compensation at retirement.


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  • How do actuarial gains and losses impact the pension benefit obligation?

    As you can see in the visual below, actuarial gains decrease the PBO while losses increase the PBO. Actuarial gains and losses typically arise when the actuary changes the estimates used to calculate the PBO.

  • How to calculate the project benefit obligation?

    Basically, you need to roll forward the obligation balance from the beginning of the year (i.e. which equals end of prior year), and then factor in the items listed in the rollforward below. That will get you to your ending PBO, and that is what is recorded on the balance sheet as the ending liability […]

  • How do you calculate the funded status of a postretirement benefit obligation?

    Calculating the funded status of a postretirement benefit obligation involves comparing the accumulated postretirement benefit obligation (APBO) to the fair market value of the plan assets. If the plan assets is greater than the APBO, then the plan is overfunded and would be recorded as a non-current asset. If the plan assets are less than […]