The projected benefit obligation was $100 million at the
beginning of the year and $106 million at the end of the year.
Service cost for the year was $6 million. At the end of the year,
there were no pension-related other comprehensive income accounts.
The actuary’s discount rate was 5%.
What was the amount of the retiree benefits paid by the
trustee?
Answer:
Retiree benefits paid is $5 million.
Explanation:
Opening projected benefit obligation (PBO) = $100 million
Ending projected benefit obligation (PBO) = $106 million
Service cost = $6 million
Interest cost = Opening PBO × Discount rate = $100 million × 5% = $5 million
Retiree benefits paid is computed using the equation given below:
Retiree benefits paid = Opening PBO + Service cost + Interest cost - Ending PBO = $100 million + $6 million + $5 million - $106 million = $5 million
Hence, the Retiree benefits paid is $5 million.
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