The accumulated benefit obligation is the the actuarial present value of benefits, vested or otherwise, the pension benefit formula attributes to employee services rendered as as specified date without assumptions about future compensation levels. It is based on employee service and compensation up to that date. However, it includes no assumption about future compensation levels. In other words the ABO is an estimate of the amount of a company’s pension plan liability at any one point in time.
ABO is estimated according to the assumption that the pension plan is to be terminated immediately, or that it does not consider any future salary increases. This is not to be confused with the projected benefit obligation (PBO), which assumes that the pension plan is ongoing, and as a result accounts for future salary increases.
The PBO and the ABO are the same for plans with flat-benefit or non-pay-related pension benefit formulas. The ABO is not used to determine the net periodic pension cost. It is used only for disclosure purposes.« Back to Glossary Index