Funding percentage of a pension fund

[Finance Dave]

Its not that simple. 80% funding means that the assets in the fund are equal to 80% of the actuarially estimated present value of all the future payouts the fund is on the hook for. There are a huge number of assumptions that go into getting that actuarial estimate and the assumptions and other inputs change every year, so this is more of "cut with an axe" type measure than a "cut with a rzaor blade" precise number.

+1

I work in a Treasury department for a MegaCorp. Although I don't manage pensions, I work daily with our pension executive. The accounting and rules for pensions are highly complex.

I'm no expert, but I do know that if a company's plan is less than fully funded, they are obligated to make contributions in such a way that they will "catch up" the funding. How much is the complex part, because it's a moving target. In years that the market is good, you may not have to make any contributions, but when the market is down, some companies struggle to keep up. Very few plans are fully funded, and I'm sure many were at or below the 80% mark a couple years ago when the markets were down considerably.