Question
XYZ Corp's defined benefit pension plan specifies annual retirement benefits equal to 1.5% service years final year's salary, payable at the end of each year.
XYZ Corp's defined benefit pension plan specifies annual retirement benefits equal to 1.5% service years final year's salary, payable at the end of each year. Mark Emerson was hired by XYZ at the beginning of 2010 and is expected to retire at the end of 2044 after 35 years' service. His retirement is expected to span 18 years. Emerson's salary is $98,000 at the end of 2024 and the company's actuary projects her salary to be $320,000 at retirement. The actuary's discount rate is 8%.
What is the effect of the change in the assumed discount rate on the PBO at the beginning of 2025 with respect to Emerson?
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