In financial reporting, what term describes the shortfall when actuarially determined pension obligations exceed employer contributions?

• A. Net pension liability.
• B. Pension overfunding.
• C. Pension surplus.
• D. Pension reserve.

Answer: (A)

In pension accounting, the funded status shows whether plan assets are enough to cover the actuarial obligations. It is calculated as the actuarial obligation (defined benefit obligation) minus the fair value of plan assets. When the obligation exceeds the assets, there is a shortfall recorded as a net pension liability on the employer’s balance sheet. This is the situation described in the question. If assets exceed obligations, you’d have overfunding or a pension surplus, and “pension reserve” isn’t a standard term for this context.