Glossary term
Funding Target Attainment Percentage (FTAP)
Funding target attainment percentage is a defined benefit pension funding measure comparing plan assets with the plan's funding target.
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What Is Funding Target Attainment Percentage?
Funding target attainment percentage, often shortened to FTAP, is a defined benefit pension funding measure comparing a plan's assets with its funding target. In plain English, it is a snapshot of how well the plan's measured assets cover the present value of promised benefits under the applicable funding rules.
FTAP matters because pension funding is not only an accounting issue. It can affect plan contributions, benefit restrictions, participant communications, employer cash flow, and the way regulators, auditors, unions, lenders, and employees read a plan's financial health.
Key Takeaways
- FTAP compares pension plan assets with the plan's funding target.
- It is used in defined benefit pension funding rules, not ordinary 401(k) account reporting.
- Related rules use adjusted funding target attainment percentage, or AFTAP, to apply certain benefit restrictions.
- Lower funded percentages can limit lump sums, benefit increases, and benefit accruals under federal pension rules.
- The calculation is technical, so the headline percentage should be read with the plan's actuarial assumptions and legal context.
Basic Formula
For example, if a pension plan has measured assets of $900 million and a funding target of $1 billion, its simplified FTAP is 90%. That does not mean every retiree has an individual account funded at 90%. It means the plan's measured assets equal 90% of the actuarially measured funding target.
FTAP Versus AFTAP
In practice, readers often see adjusted funding target attainment percentage, or AFTAP, because federal rules use adjusted measures for benefit restrictions under Internal Revenue Code Section 436. The adjustment details can matter. Certain balances, assumptions, or contributions may be treated in specific ways, so the regulatory percentage is not always the same as a simple assets-divided-by-liabilities calculation.
That is why FTAP should be read as a pension funding term, not a casual solvency ratio. The plan actuary's certification, assumptions, valuation date, interest rates, mortality assumptions, and legal adjustments all shape the result.
Why the Percentage Matters
Federal benefit restriction rules generally become more important when a defined benefit plan's funded status falls below specified thresholds. Plans below 80% may face restrictions on certain accelerated forms of payment, such as some lump sums. Plans below 60% can face more severe restrictions, including limits on benefit accruals and certain plan amendments.
Those thresholds make the percentage practical for participants and employers. A decline from 86% to 81% may be concerning, but a decline below a legal threshold can change what the plan is allowed to do.
How To Read It
A high FTAP is generally better than a low FTAP, but the number is not self-sufficient. A plan can look better or worse because of interest-rate changes, asset returns, contribution timing, demographic experience, assumption changes, or plan design. A rising funded percentage may reflect strong asset performance, but it may also reflect technical assumption changes.
For employers, FTAP affects funding strategy and potential cash demands. For employees and retirees, it is one signal of plan health, but it should be read alongside PBGC protections, sponsor strength, plan freezes, contribution policy, and formal participant notices.
Common Misread
FTAP should not be read like a checking-account balance. Pension assets and funding targets are measured under actuarial and legal rules, and both sides of the ratio can move when assumptions change. A participant notice, actuarial certification, or annual funding notice may provide more context than the percentage alone.
For that reason, serious analysis should look at the certified AFTAP, valuation date, contribution history, and any restrictions already disclosed to participants.
The Bottom Line
Funding target attainment percentage is a defined benefit pension funding measure that compares plan assets with promised-benefit funding targets. It is useful, but it should be interpreted with the pension rules and actuarial assumptions behind it.