Gage began a defined benefit pension plan on January 1, 2014. During 2014, the service cost was $450,000. Gage contributed $450,000 to the pension plan for 2014. The actuary said the projected benefit obligation at December 31, 2014 was $450,000. As of December 31, 2014, 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, 2014.

Question

Gage began a defined benefit pension plan on January 1, 2014. During 2014, the service cost was $450,000. Gage contributed $450,000 to the pension plan for 2014. The actuary said the projected benefit obligation at December 31, 2014 was $450,000. As of December 31, 2014, 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, 2014.

Quizplus · Accepted Answer

I. The pension plan is fully funded because the contributions made by Gage ($450,000) are equal to the service cost ($450,000) and the projected benefit obligation ($450,000).

II. Gage does not need to report a liability regarding the pension plan at December 31, 2014, because the pension plan is fully funded and there is no unfunded liability.

Gage Began a Defined Benefit Pension Plan on January 1