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  • What are the two types of pension plans tested on the CPA exam?

    The two main types are a defined contribution plan (e.g. 401(k), which is where the employee and potentially the employer contribute to the employee’s retirement plan. The other option is a defined benefit plan, which is 100% funded by the employer (not as common anymore).

  • What items increase the pension benefit obligation and what items decrease the pension benefit obligation?

    There are five main items that either increase the PBO (increase the liability) or decrease the PBO (decrease the liability. The items that will increase the PBO include interest cost, service cost, and actuarial losses. The items that decrease the PBO (reduce the liability) include actuarial gains and benefits paid to retirees.