Question
Michael (age 35) commenced employment at Larkin Supplies Inc. on January 1, 2020. Larkin sponsors a defined benefit plan where employees vest 5% after year
Michael (age 35) commenced employment at Larkin Supplies Inc. on January 1, 2020. Larkin sponsors a defined benefit plan where employees vest 5% after year one, an additional 10% after year two, and an additional 15% each year after until 100%. Michaels current salary is $180,000 per year, and he is expected to retire in 20 years, at which time his salary is estimated to be $350,000 per year. The annual benefit formula is equal to 2.5% x number of years of service x final salary. Determine the gross annual benefit payment earned as of December 31, 2021, under a (1) VBO, (2) ABO, and (3) PBO pension liability measurement.
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