A defined benefit pension plan expects to pay out $25 million per year over the next 10 years to pensioners. The fund currently has $155 million in pension assets that are earning 10% per year. This plan is underfunded.

Question

Quizplus · Accepted Answer

The pension plan is not underfunded because the assets will grow to cover the expected payouts. The $155 million earning 10% annually will grow sufficiently to meet the $25 million annual payouts over the next 10 years.

A Defined Benefit Pension Plan Expects to Pay Out $25