CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Select the correct statement(s):

I. Underfunding of the reported funding level is not a concern for investors because what matters is the funding status of the real economic position of a pension plan.
II. It is possible that a company's pension plan can be underfunded on the basis of funded status, but overfunded according to the reported funding level.
Correct Answer: II

User Contributed Comments 4

User Comment
josepe Funded status = fair value of plan assets less PBO. If PBO is larger than fair value of plan assets, funded status is underfunded. Reported funding level depends on expected return on plan assets. If expected return is higher than actual return, as well in this case as higher than required return to be fully funded, reported funding level will be overfunded.
josepe I should have mentioned that fair value of plan assets depends only on actual return, not expected return.
DCPWS Josepe - very helpful.
lvjunzhang why not I
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