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The expected return on plan assets is one of the five components of pension expense, the others being service cost, interest cost, amortized gains or losses, and amortized prior service cost. The expected return on plan assets will reduce the pension expense.

If the expected return and the actual return are different nothing will occur unless the difference falls outside of the corridor, which is 10 percent of the PBO or plan assets. At this point the amount recognized is the amount exceeding PBO or plan assets. The amount that the difference exceeds the corridor, a gain or a loss is recognized. It’s referred to actuarial gains/losses.

The expected long-term rate of return on plan assets is described as the rate reflecting the average rate of earning on the fund invested to provide for the benefits included in the PBO (pension benefit obligation).

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