Sachs Brands defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years× final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginningof 2004 and is expected to retire at the end of 2038 after 35 years’ service. Her retirement is expected to span18 years. Davenport’s salary is $90,000 at the end of 2018 and the company’s actuary projects her salary to be$240,000 at retirement. The actuary’s discount rate is 7%.Required:1. Draw a time line that depicts Davenport’s expected service period, retirement period, and a 2018 measurement date for the pension obligation.2. Estimate by the projected benefits approach the amount of Davenport’s annual retirement payments earned asof the end of 2018.3. What is the company’s projected benefit obligation at the end of 2018 with respect to Davenport?4. If no estimates are changed in the meantime, what will be the company’s projected benefit obligation at theend of 2021 (three years later) with respect to Davenport?
Sachs Brands defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years
× 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 $90,000 at the end of 2018 and the company’s actuary projects her salary to be
$240,000 at retirement. The actuary’s discount rate is 7%.
Required:
1. Draw a time line that depicts Davenport’s expected service period, retirement period, and a 2018 measurement date for the pension obligation.
2. Estimate by the projected benefits approach the amount of Davenport’s annual retirement payments earned as
of the end of 2018.
3. What is the company’s projected benefit obligation at the end of 2018 with respect to Davenport?
4. If no 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?
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