Question

what is relationship between pension benefit and pension asset?

what do i get for pbo - pension asset?

thank you

Answer 1

Pension benefits are provided to retired government officials to secure their life after retirement. Pension benefits help retired employees to leave a tension free life after their job is over. Various type of pension benefits are provided like family pension, compensation pension, voluntary pension, superannuation pension etc. Extraordinary pension is provided to officials who are disabled or to the families of officials who die during their employment period.

Pension assets are assets that are bought with the contribution made to the pension plan for the different pension benefits after retirement. A corporation is required to show pension assets on its balance sheet if its fair value is more than projected benefit of obligation. Pension assets is the value of the estimated future employee service to meet the pension obligation after their retirement. Pension assets can be cash as well as investments such as bond.

A pension plan is a plan that an employer contributes for its employee's future benefits. Funds in the pension plan is invested on the employee's behalf and income earned from these investments benefits employees in the future. Alongwith employer contribution, some plans have voluntary contribution from employees. Two main types of pension plan are Defined benefit plan and defined contribution plan.

Projected benefit obligation is a measurement of what a company needs to invest now to meet its future obligations. It determines how much contribution should be made in a pension plan to meet the pension benefits for its employees who will benefit after retirement. PBO assumes that the plan will not dissolve in the future years and estimates the compensation required by the company to pay its future obligation. An actuary does this calculation for Projected benefit obligation.