Sachs Brands' defined benefit pension plan specifies annual
retirement benefits equal to: 1.3% × service years × final year's
salary, payable at the end of each year. Angela Davenport was hired
by Sachs at the beginning of 2004 and is expected to retire at the
end of 2038 after 35 years' service. Her retirement is expected to
span 18 years. Davenport's salary is $91,000 at the end of 2018 and
the company's actuary projects her salary to be $285,000 at
retirement. The actuary's discount rate is 9%.
At the beginning of 2019, changing economic conditions caused the
actuary to reassess the applicable discount rate. It was decided
that 10% is the appropriate rate. (FV of $1, PV of $1, FVA of $1,
PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate
factor(s) from the tables provided.)
Required:
Calculate the effect of the change in the assumed discount rate on
the PBO at the beginning of 2019 with respect to Davenport.
(Do not round intermediate calculations. Round your final
answer to nearest whole dollar.)
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