A pension plan is underfunded if the projected benefit obligation exceeds the fair value of the pension plan assets.

Question

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This statement is true. A pension plan is considered underfunded if the projected benefit obligation (the future benefit payments owed to employees) is greater than the fair value of the pension plan assets set aside to pay for those benefits. This means that the plan doesn't have enough assets to cover all of its liabilities, and may require additional contributions from the plan sponsor to meet its obligations.

A Pension Plan Is Underfunded If the Projected Benefit Obligation