Question

Sachs Brands defined benefit pension plan specifies annual retirement benefits equal to: 1.3% x service years x final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2004 and is expected to retire at the end of 2038 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $96,000 at the end of 2018 and the company's actuary projects her salary to be $310,000 at retirement. The actuary's discount rate is 6%.

Required:

2) estimate by the projected benefits approach the amount of Davenport's annual retirement payments earned as of the end of 2018. (I got 60,450 which was correct)

3) What is the company's projected benefit obligation at the end of 2018 with respect to Davenport? (I got 204,082 which was correct)

4) If not estimates are changed in the meantime, what will be the company's projected benefit obligation at the end of 2021 (three years later) with respect to Davenport? I NEED THIS ANSWER

Answer 1

2	Estimate by the projected benefits approach the amount of davenport retirement earned as of the end of 2018
	1.3%*15 years*$310000
	60450
3	what is the company's projected benefit obligation at the end of 2018 with respect to Davenport?
	Present value of retirement annuity as of retirement date at the end of 2038
	n = 18 years
	I = 6%
	$60450*10.828
t	654552.6
	Accumulated benefit is the present value of the retirement benefits at the end of 2018
	$654553*0.3118
	204089.5
4	If not estimates are changed in meantime, what will be the company's projected benefit obligation
	n = 18 years
	I = 6%
	1.3*18 years*

4^th question can be calculated only when there davenport salary after 3 years is given

Answers slightly may vary due to pv factor