Direct your attention to the company with perhaps the largest private pension plan in the world—General Motors. GM’s note relating to its pension plan is included in Exhibit 17-12 on pages 1039–1040. Use that information to answer the following questions.
1. Compute GM’s total PBO as of December 31, 2004.How much has GM set aside to offset the PBO?
2. Now consider GM’s postretirement benefits other than pensions. Add to the PBO from question (1) GM’s accumulated postretirement benefit obligation (APBO). What is GM’s estimated obligation related to pensions and other postretirement benefits?
3. Determine the assumption GM made regarding the rate at which health care costs would increase for 2005. If health care costs had risen at a faster rate, what effect did GM determine that would have had on the company’s APBO?