we discount all expected future payments into year 1, we calculate PBO in year 1 after workers have worked 1 years.

we discount all expected future payments into year 2, we calculate PBO in year 2 after workers have worked 2 years.
-) Another way to calculate PBO in year 2 from PBO in year 1
PBO in year 2 = PBO in year 1 + PBO in year 1 x discount rate + service cost in year 2. However this this larger than PBO calculated above because PBO in year 1 + PBO in year 1 x discount rate = PV of all expected future payments into year 2
Whar are your opinions?

-For example, we have a pension contract that define annual end of year payment of 1% of final salary for each year of service, until death.
-Assumption:

current salary: 100,000

salary growth rate : 3%

Disocunt rate : 7%

year till retirement: 15

years till death : 10

from those assumptions, we calculate each year employee will receive 1,558 per year for 10 years → it’s also expected future payment.
There is only one expected future payment, i don’t understand which expected future payments yoy are mention?

So . . . year 1 each employee will earn 1,558 (which seems paltry, by the way) discounted for 15 years at 7% per year.

If we increase that by 7% we get the year 2 PV of what they earned in year 1. But they’ll earn another year’s benefits in year 2: 1,558 (still paltry) discounted for 14 years @ 7% per year.

However, i remember definition of DBO: company promises to pay a fixed future benefit to employee in the future after they retire.
And fixed future benefit here is 1,558 per year for 10 years. I don’t undersand why they’ll earn another year’ benefits in year 2: 1,558
PV here is PV (1,558 in year 1) + PV (1,558 in year 2) +…

It means that, for example,
in year 1: expected future payment : 1558 per year for 10 years
in year 2: expected future payment: 3116 (1558 x 2) per year for 10 years
in year 3: expected future payment : 1558 x 3 per year for 10 years
Do i understand correctly?