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Underfunded Pension Plan

Underfunded Pension Plan Definition

This is when a company’s retirement plan has more liabilities than assets.  The money needed to fund current and future retirements is not yet available, so there is no promise that future retirees will received their promised pensions or that current retirees will get their allotted amounts.  This can occur for several reasons.  Interest rate changes, a poorly performing stock market, company mergers, bankruptcies, and an economic slowdown are all potential reasons for a pension plan to become underfunded.

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