Triblock Industries has a defined benefit pension plan. Using a discount rate of

Question

Triblock Industries has a defined benefit pension plan. Using a discount rate of 6%, the actuary estimated the company’s projected benefit obligation (PBO) to be $278,343 and $309,796 at the beginning and end of the current year, respectively. The pension plan has not been amended and there were no revisions to the estimates used to derive the PBO. What portion of the current year’s increase in the PBO is attributable to service (that is, the service cost component of pension cost) during the current year? What is the service cost?

Explanation / Answer

Solution:

PBO at the end of current year. = $309,796

Less: PBO at the end of last year. = ($278,343)

Change in PBO. = $31,453

Less: Interest cost(278343*6%). = ($16,700)

Service Cost. = $14,753

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