Is it correct to say that discount rate as the minimum required return is ony applicable if plan is fully funded? Otherwise, min.required return should be higher than the discount rate

First statement is correct. Not sure if the second statement is, however. If the plan is overfunded, does the min required return still need to be higher than the discount rate? I don’t believe so. My point is, I think funded status in either direction does play into it. It’s all about achieving a rate of return in the plan assets that keeps pace with the growth of the present value of plan liabilities (PBO). PBO increases with the passage of time and with wage increases (these are components of the discount rate), so the goal of plan assets is to earn a rate of return sufficient to keep pace with growth of PBO. My sense is that if the plan has a surplus, then that min required return could theoretically be less than the discount rate. I could be wrong though.

Also remember that the discount rate already includes inflation, so don’t add it.