What can lead to a decrease in employer contributions to a traditional defined benefit pension plan?

The correct answer highlights that higher-than-anticipated forfeitures in a defined benefit pension plan can lead to a decrease in employer contributions. Forfeitures occur when a participant leaves the company before being fully vested and thus loses their accrued benefits. When employers experience a higher rate of forfeitures than expected, they can reduce their contributions because the liabilities they need to fund decrease. This is because the amount of pension benefits they need to pay out diminishes when a portion of employees do not continue with the plan long enough to earn them.

In contrast, increased salaries due to high inflation may elevate the pension costs because benefits are typically calculated based on salary, leading to potentially higher employer contributions in an effort to maintain the promised benefit levels. Similarly, lower-than-expected investment returns can increase funding demands on the plan as the employer may need to contribute more to ensure future payouts. Cost-of-living adjustments (COLAs) also generally increase employer liabilities, as they typically require the employer to keep up with inflation when adjusting pension payments to retirees. Thus, while all the other options can result in increased employer contributions, higher-than-anticipated forfeitures specifically reduce the overall obligation, therefore leading to decreased employer contributions.