Question

A measure of an employer's pension obligation using future salary levels is the

a. accumulated benefit obligation
b. defined benefit obligation
c. projected benefit obligation
d. vested benefit obligation

Answer 1

The employer's pension obligation using future salary levels is known as the projected benefit obligation, part of defined benefit pension plans which have become less common than defined contribution plans like 401(k)s.

Step-by-step explanation:

The measure of an employer's pension obligation using future salary levels is c. projected benefit obligation. This is a part of a defined benefit plan where the employer promises to pay a certain amount to the employee upon retirement, based on factors like salary at retirement age and years of service. This contrasts with defined contribution plans like 401(k)s and 403(b)s, where the employer contributes a fixed amount regularly to the employee's retirement account, which is then invested by the employee. Defined benefit plans have become rarer, as they can impose substantial long-term financial obligations on employers due to factors such as inflation and longevity risks.