Gage began a defined benefit pension plan on January 1, 2015. During 2015, the service cost was $450,000. Gage contributed $450,000 to the pension plan for 2015. The actuary said the projected benefit obligation at December 31, 2015 was $450,000. As of December 31, 2015, what statements can Gage make about the pension plan? I. The pension plan is fully funded.
II) Gage does not need to report a liability regarding the pension plan at December 31, 2015.

Question

Quizplus · Accepted Answer

The pension plan is considered fully funded when the employer's contribution matches the projected benefit obligation, which is the case here ($450,000 contributed against a projected benefit obligation of $450,000). Therefore, Gage does not need to report a liability for the pension plan as of December 31, 2015, because the plan's funding status is balanced.

Gage Began a Defined Benefit Pension Plan on January 1