Why is the funding gap of a defined benefit pensionplan referred to as the "unfunded liabilities"?
What will be an ideal response?
The funding gap is the projected value of the liabilities minus the market value of fund assets. If we treat the liabilities as an absolute or positive number so that the funding gap is positive, thenwe can say we have excess liabilities that are not accounted for – which is to say they are "unfunded". Hence, the funding gap in this case represents "unfunded liabilities."
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