Originally Posted by
PilotWombat
That's not correct. If the plan is set up with a 5% return, it pays 5%. If the actual market return is higher, the excess earning go into a reserve fund. The next time the market return is less than 5%, the reserve fund is used to fill out the 5%. If there's a string of bad luck and the reserve fund runs out, the company is required to use operating cash to fill it out. Since this process happens every year, the program is always fully funded.
Reading this again, I disagree with your last sentence. It’s not fully funded always. They acknowledged the scenario where investments could go down and it wouldn’t be funded to the target rate. Having the company cover that difference would be a separate program. There is no guarantee of 5%.