Accumulated Benefit Obligation

You run a big factory. You make windshield wipers that whistle. You have been successful in the last decade, largely thanks to Tesla's affinity for F#. Your pension obligation of a billion dollars is mostly funded with seven hundred million invested in index funds. You still owe three hundred million bucks to fully fund that pension.

You don't need to pay all that dough today, but regardless, your accumulated benefit obligation (or ABO) is the grossed up billion dollars you owe, at least at some point, along the long, lonesome highway.

More specifically, the ABO discounts back future pension obligations expected to be paid to employees, such that it takes into account, in one form or another, the expected salary increases and other contributions, as well as market increases coming down the line. Illustratively, if your ABO had a full billion dollars today sitting in public, liquid index funds, with only 5% of your workforce retiring each year, your pension would be considered "over-funded," and you would be a rare bird in this highly aggressive investment universe of our modern era.