In this formulation of (1), we have assumed that the pension will not be overfunded.
The full funding limitation generally makes it impossible for firms to make any contributions to overfunded plans.
In this well-funded plan universe, it becomes necessary to consider the best way to utilize excess assets in overfunded plans.
In contrast, a declining 30-year bond rate had little impact during the late 1980s and 1990s when most plans were overfunded.
He argues that firms do not do so because their pension plans were significantly overfunded at the time of conversion and would face stiff tax penalties on their excess assets.
A cautious plan sponsor with a concern for its reputation may choose to contribute more than this minimum, which, along with common investment policies, will likely make its plan overfunded.
A necessary (but not sufficient) implication of the reversion tax hypothesis is that firms who switch to cash balance plans should be overfunded prior to conversion.
Does he perhaps think that libraries were overfunded this year and thus require a decrease next year?
