Pondering Pensions, Part 2: Shock Absorbers For Smoothing Reality: In a previous report, it was demonstrated how one aspect of pension accounting produced operating earnings boosts simply because the bull market had punched up the size of pension plan assets. The smoothing tool under review was the reduction of pension cost for an expected rate of return on plan assets. If a firm expected a 10% return on plan assets over the long run, it wouldn't matter whether it earned 20% or lost 45%: pension cost would still be defrayed by 10% assumed to be earned on plan assets. In theory, that keeps at least one component of pension cost from being spiky - but the growth in pension assets combined with this rule has made pension plans something of an earnings growth driver. That's not the only "shock absorber" built into pension accounting. There are a couple more that are available - and one of them may already be a critical component of net pension cost in 2000.