A company with a fully funded pension plan:
A)Recognizes no pension expense.
B)Reports no long-term liability for future pension payments.
C)Does not utilize the services of a trustee to operate the pension plan.
D)Recognizes pension expense equal to the cash payments made to retirees during the current period.

Question

Quizplus · Accepted Answer

A fully funded pension plan means that the company has set aside enough assets to cover its future pension payments. As a result, there is no long-term liability for future pension payments that needs to be recognized on the company's balance sheet. However, the company still needs to recognize pension expense each period, which includes not only the cash payments made to retirees but also the changes in the value of the plan's assets and liabilities. Therefore, options A, C, and D are incorrect.

A Company with a Fully Funded Pension Plan