Return on Assets
Expected return on the plan assets
- Calculated by using an expected long-term rate (may be the same as the discount (or settlement rate) or it may be a different rate of return on assets).
- The expected rate of return (rather than the actual return) is applied to a “market-related” asset value.
- Applying an expected return rate removes the effects of short-term gains and losses on long-term investments and lessens the volatility in pension expense.