Compensation Glossary

Projected Benefit Obligation (PBO)

PBO is the present value of an employee's pension. For a business, the PBO will be an amount the company needs to have currently in its pension plan to cover future pension obligations to its employees. PBO is an accounting term used to describe the amount of money a company must pay into a defined-benefit pension plan to satisfy all pension entitlements that have been earned by employees up to that date. The pension benefit obligation (PBO) is calculated by an actuary, who determines the benefits needed through a present value calculation.