Overfunded Pension Plan

AAA

DEFINITION of 'Overfunded Pension Plan'

A company retirement plan that has more assets than liabilities. In other words, there is a surplus amount of money needed to cover current and future retirements. Although the surplus can legally be recorded as company income, it cannot be paid out to corporation shareholders like other income as it is reserved for current and future retirees.

INVESTOPEDIA EXPLAINS 'Overfunded Pension Plan'

Generally, pension plans become overfunded as a result of a stock market boom (provided the pension plan is invested in stocks, as many are) or when a defined-benefit plan is converted to a cash-balance plan. It usually more common for a pension plan to be underfunded as investment shortfalls tend to be more common.

RELATED TERMS
  1. Underfunded Pension Plan

    A company retirement plan that has more liabilities than assets. ...
  2. Retirement Contribution

    A monetary contribution to a retirement plan. Retirement contributions ...
  3. Pension Maximization

    A retirement strategy for couples that involves purchasing a ...
  4. Retirement Planning

    The process of determining retirement income goals and the actions ...
  5. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  6. Pension Adjustment - PA

    The amount of contributions that can be made to a Registered ...
Related Articles
  1. 10 Common Retirement Planning Mistakes ...
    Retirement

    10 Common Retirement Planning Mistakes ...

  2. 7 Steps To Evaluate A Financial Adviser
    Investing Basics

    7 Steps To Evaluate A Financial Adviser

  3. 6 Retirement Planning Tips For Late ...
    Retirement

    6 Retirement Planning Tips For Late ...

  4. Set It And Forget It Doesn’t Work For ...
    Investing Basics

    Set It And Forget It Doesn’t Work For ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center