2016 Public Pension Funding Study

Source: Rebecca A. Sielman, Milliman, White Paper, September 2016

From the introduction:
The Milliman Public Pension Funding Study annually explores the funded status of the 100 largest U.S. public pension plans. We report the plan sponsor’s own assessment of how well funded a plan is. We also recalibrate the liability for each plan based on our independent assessment of the expected real return on each plan’s investments. This process enables us to independently determine funded status without reflecting any bias or lag that may exist in the plan sponsor’s own return expectations.
– As of June 30, 2016, the aggregate funded ratio is estimated to be 69.8%, as markets took back some of the gains from 2012 to 2014 and discount rates declined
– Plan sponsors continue to reduce interest rate assumptions in the expectation that returns over the coming decades will be lower
– The difference between the average sponsor-reported assumption of 7.50% and our independently determined assumption of 6.99% is the highest we have seen, indicating that pressure to reduce interest rate assumptions is unlikely to abate