This study empirically examines possible motivational factors leading to reductions in pension plan overfunding. The results indicate that firms with severe financial weakening terminate pension plans. Firms with less severe financial weakening change actuarial assumptions to reduce required cash contributions to pension plans. Although decline in marginal tax rates and increased susceptibility to takeover are positively associated with overfunding reductions, increased financial weakening appears to be the most plausible explanation. The results are consistent with termination of pension plans being a costly source of financing.