Which of the following statements best describes how U.S. tax laws affect company funding of pension plans?

Multiple Choice

• The tax laws encourage companies to overfund their pension plans.

• Higher marginal tax rates incentivized companies to underfund their pension plans.

• The tax laws limit the deductibility of contributions to pension plans for firms whose plans are underfunded.

• The tax laws have little to no impact on the funding of pension plans.