Funded Status


DEFINITION of 'Funded Status'

The status of pension plan that has accumulated assets that have been set aside for the payment of retirement benefits to employees. Unfunded plans, also called pay-as-you-go arrangements, do not have assets set aside and retirement benefits are usually paid directly from employer contributions.

BREAKING DOWN 'Funded Status'

According to an article entitled "Pension Reporting Sparks Debate", which appeared in The Wall Street Journal on July 5, 2006, for nearly 20 years companies have had to include the amount owed to employees based on the projected obligation in the footnotes to the financial statements.

However, at the time of writing, FASB has proposed that companies move their pension deficits or surpluses onto the balance sheet, rather than just show them in the footnotes. Moving the "funded" status of pension plans - as well as other retirement benefit obligations like health-care plans - onto the balance sheet could force many companies to recognize a big liability, which could cut their net worths and possibly hinder dividend payments or jeopardize lending agreements.

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  1. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  2. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  3. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  4. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  5. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
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