In order to decrease the projected benefit obligation (PBO) of a pension plan, which of the following changes in actuarial assumptions can be made to yield the desired result? A) Increase the expected rate of return. B) Decrease the rate of compensation increase. C) Decrease the discount rate. D) Decrease the expected rate of return. I will post the answer in a minute
B. A will cut pension expense but does not affect PBO C will increase PBO D will increase pension expense
B. Agreed with Edmund
B is correct. I was confused that how come “A” is wrong. Edmund, thanks for your explanation!
Compared to Service Cost and Interest Cost that are used in calculating both Pension Expense and PBO, Expected Return is used in only Pension Expense.
This was a real easy one. Put in some more level2frmLA, we can’t stop at such a lame level.