Chapter 17 Discussion - Instead of underfunded pension plan

Intermediate Financial Accounting II

1. Chapter 17 Discussion Question

Instead of underfunded pension plan, we have seen “companies’ U.S. pension plans are more overfunded than they have been in years amid strong equity markets.”  This article from WSJ sheds light on overfunded pension plan, which seems to be against the common norm.  Read  Chap 17 Companies’ U.S. Pension Plans Are More Overfunded Than They Have Been in Years - WSJ.pdf  and answer the following questions:

· How are defined benefit pension plan obligations measured?  How is a pension plan’s funded status measured?  ( Hint: You can refer to the textbook for this.)

· How are changes in bond interest rates affecting the measurement of pension plan obligations?

· What factors have led to the current overfunded status of large U.S. companies’ pension plans?

· Why don’t companies remove assets from overfunded pension plans to redirect use to other corporate purposes?