Funding Ratio

Funding ratio is a measure used to assess the financial health of a pension plan or similar fund. It compares the plan’s current assets (what it owns) to the liabilities (what it owes to retirees and beneficiaries). A funding ratio of 100% means the plan has exactly enough assets to cover its obligations. A ratio above 100% indicates a surplus, while below 100% signals a shortfall. This metric helps stakeholders understand the plan's ability to meet future payments and guides decisions on funding and risk management.