Assume a pension plan\'s actuarially-computed liabilities are greater than the a

Question

Assume a pension plan's actuarially-computed liabilities are greater than the actuarial value of the assets. How does this difference between assets and liabilities affect the actuarially determined contribution to the pension plan required for the following year?
a. It does not enter into the actuary's calculation if the actuarial value of plan assets exceeds their aggregate cost
b. It is not considered in establishing the required contribution, but it is disclosed in the schedule of funding progress
c. The entire amount of the unfunded actuarially accrued liability is included in the next year's required contribution to show "good faith" to retirees
d. A portion of the unfunded actuarial accrued liability is included in the next year's contribution by means of an amortization process

Explanation / Answer

Option d. is the correct answer.
A pension plan's actuarially computed liabilities are greater than the actuarial value of the assets were called underfunded. The underfuned plans are combined and shown as one amount on the balance sheet. The current portion of a net pension liability represents the amount of benefit payments to be paid in the next 12 months, if that amount cannot be funded from existing plan assets. Otherwise, the pension liability is classified as a noncurrent liability. The underfuned plans are combined and shown as one amount on the balance sheet. The current portion of a net pension liability represents the amount of benefit payments to be paid in the next 12 months, if that amount cannot be funded from existing plan assets. Otherwise, the pension liability is classified as a noncurrent liability.

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