How to Calculate the Funded Status of a Pension
This video shows how to calculate the funded status of a pension. The funded status is the net of:
(1) the projected benefit obligation
(2) the fair market value of plan assets
If the projected benefit obligation is greater than the fair market value of plan assets, then the net difference appears on the balance sheet as as a pension liability and the pension is classified as underfunded. If, however, the fair market value of plan assets is greater than the projected benefit obligation, then the net amount is shown on the balance sheet as a pension asset and the pension is classified as overfunded.
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