Pension shortfall
Pension shortfall
A pension shortfall occurs when a company's pension fund doesn't have sufficient funds to meet expected future payment obligations. This can happen in defined-benefit plans, which place the risk of investment returns on the company rather than the employee. If investments underperform, the plan won't have the liquidity available to meet its defined-benefit obligations. In a pension shortfall situation, the company must make additional deposits into the fund. Pension deposits are an expense to the company.
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