Underfunded Pension Plan

AAA

DEFINITION of 'Underfunded Pension Plan'

A company retirement plan that has more liabilities than assets. In other words, the money needed to cover current and future retirements is not readily available. Hence, there is no assurance that future retirees will receive the pensions they were promised or that current retirees will continue to get their previously established distribution amount.

INVESTOPEDIA EXPLAINS 'Underfunded Pension Plan'

Pension plans can become underfunded in a variety of ways. Interest rate changes, a weak stock market, mergers and bankruptcies can all greatly affect company pensioners. During times of an economic slowdown pension plans are most susceptible to becoming underfunded.

RELATED TERMS
  1. Overfunded Pension Plan

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

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

    A situation in which a company offering employees a defined benefit ...
  4. Pension Plan

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

    The amount of contributions that can be made to a Registered ...
  6. Retirement Planning

    The process of determining retirement income goals and the actions ...
Related Articles
  1. Retirement

    How do Pay As You Go pension plans work?

  2. Retirement

    The Investing Risk Of Underfunded Pension ...

  3. Retirement

    7 Signs Your Pension Fund Is In Trouble

  4. Investing

    How To Evaluate Pension Risk By Analyzing ...

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center