Advanced Funded Pension Plan

DEFINITION of 'Advanced Funded Pension Plan'

A pension plan that is funded concurrently with the employee's accrued benefits, such that the funds are set aside well before the employee's retirement. Advanced funded pension plans are generally defined contribution plans, and are fully funded. They can be funded by the employer alone, or by some combination of the employer and the employee.

BREAKING DOWN 'Advanced Funded Pension Plan'

In contrast to an advanced funded pension plan, an unfunded pension plan uses actuarial assumptions to determine the periodic contributions it makes to the plan. Defined benefit plans are more difficult to fund in advance because there are so many variables in computing the funding necessary to produce the benefit.