There is no single definition of a fully funded defined benefit plan.  One measure of whether a defined benefit pension plan is fully funded is determined by the actuary of the plan in the course of the annual valuation of the assets and liabilities of the plan for funding purposes.  Assets at least equal to a particular liability measure, called the adjusted funding target attainment percentage, there are no restrictions on plan distributions and benefit accruals.

Under a different measure, a plan is considered fully funded when the plan’s assets are sufficient to pay for the present value of the liabilities of the plan in the event of plan termination.

Another measure of full funding is when the plan sponsor is not able to make a tax deductible contribution to the plan.

For more information about how the funding level of your defined benefit pension plan is determined and what factors affect that determination, please contact a Nyhart pension professional.

This article was last updated on October 14, 2011