A defined benefit pension plan specifies annual retirement benefits equal to1.3%service yearsfinal year's salary, payable at the end of each year.An employee with18 years of serviceis expected towork 21 more years before she retires, and herretirement is expected to span 22 years. The company's actuary projects her salary to be$265,000at retirement. Thediscount rate is 6%.

Suppose that the actuary made the followingchanges in assumptions and estimates:

• Retirement will span 24 years (instead of 22)
• Final salary is estimated to be $270,000 (instead of $265,000)
• Discount rate is 5% (instead of 6%)

Required:

1. Without calculations,determine whetherthe longerretirement spanwillincrease or decrease PBO?Explain(must explain to receive credit).

2.Calculatethe gain or loss resulting from the implementation ofall threechanges above. Specify whether it isa gain or a loss. Must show your work to receive credit.