really? reported pension expense is more sensitive to actuarial assumption changes than PBO? Which of the following measures is least sensitive to changes in pension plan actuarial assumptions? A) Reported pension expense. B) Funded status. C) Projected benefit obligation (PBO). Your answer: A was incorrect. The correct answer was C) Projected benefit obligation (PBO). Reported pension expense is a net (smaller) amount and therefore, is generally quite sensitive to relatively minor changes in actuarial assumptions. Changing an assumption may have a small effect on the projected benefit obligation (PBO) but may have a much larger effect on the funded status (which is a net pension amount).
They would have gotten me on that one too. I am not sure I understand the logic
i think maybe because Net pension expense can be affected by more factors, like Expected Retrun on assets for example. A change in that wouldnt affect PBO but would affect NPE. I guess the way i think of it, anything that affects PBO affects Net pension expense, but not everything that affects net pension expense affects PBO. I dont know if this logic is right, but it makes sense in regards to this question
Good question. The % change for pension expense is higher than for % change in PBO for sure. I understand the logic for funded status per the solution provided also.