Defined Benefit Plan Underfunding Accounting

ABC Corporation sponsors a defined benefit plan for its employees. The plan specifies that retirees will receive an annual payment equal to 2% of their average salary during the last five years of employment multiplied by the number of years of service. As of the end of the current fiscal year, ABC's actuaries have determined that the present value of the future benefits owed to current employees under this plan is $10 million, while the fair value of the plan assets is $7 million. The company has made contributions to the plan but is still in a position where the plan is underfunded.

Based on this information, which statement correctly describes the accounting implications for ABC Corporation in relation to the defined benefit plan?