TechClone, Inc. has a defined benefit pension plan that specifies annual, year-end retirement benefits equal to:

• 1.7% Service years Average of employees final 3 years of salary before retirement

John Smith was hired by TechClone at the beginning of 1990. He is expected to retire at the end of 2034 after 45 years of service. His retirement is expected to span 20 years. At the end of 2019, 30 years after being hired, his salary is $180,000. In the previous two years (2017 and 2018), Brattons salary was $175,000 and $170,000, respectively. The company's actuary projects Smith's salary will be $190,000, $195,000, and $200,000 in his final 3 years of employment before retirement. The actuarys discount rate is 5%. Below are some relevant time value of money factors.

• Present value of an ordinary annuity of $1 (n = 30; i = 5%): 15.37245
• Present value of an ordinary annuity of $1 (n = 20; i = 5%): 12.46221
• Present value of an ordinary annuity of $1 (n = 15; i = 5%): 10.37966
• Present value of $1 (n = 30; i = 5%): 0.23138
• Present value of $1 (n = 20; i = 5%): 0.37689
• Present value of $1 (n = 15; i = 5%): 0.48102

Required:

[1] Estimate the amount of John Smith's annual retirement payments for the 20 retirement years earned as of 2019 after he completed 30 years of service.

[2] What is the company's projected benefit obligation (PBO) at the end of 2019 with respect to Smith?

[3] Explain in words what would happen to the projected benefit obligation (PBO) one year later, at the end of 2020. Would the balance of the PBO change and, if so, where would the change in the PBO be recorded in the financial statements?