Public Pension Funding Study

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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.

Our study draws on the Total Pension Liability figures that are used for financial reporting under the accounting standards that apply to governmental entities, Governmental Accounting Standards Board Statements No. 67 and 68 (GASB 67/68). For many plans, this figure is similar to the measurement of liability that the plans use for determining contribution amounts. However, GASB 67/68 imposes more uniformity on the financial reporting process, so the Total Pension Liability figures are more directly comparable from plan to plan. GASB 67/68 also requires disclosure of metrics that enable us to project the Total Pension Liability forward beyond the plan sponsor’s fiscal year end. With this information we can estimate how funded status will react to changes in the economic environment.


  • As of June 30, 2017, the aggregate funded ratio is estimated to be 70.7%, as assets experienced healthy growth
  • One-third of the plans reduced the interest rate assumptions they use for determining contribution amounts
  • The difference between the median sponsorreported discount rate (7.50%) and our independently determined assumption (6.71%) continues to widen, indicating that further reductions in interest rate assumptions are likely

This 2017 report is based on information that was reported by the plan sponsors at their last fiscal year ends—June 30, 2016 is the measurement date for most of the plans in our 2017 study. At that time, plan assets were still feeling the effects of market downturns in 2014-2015 and 2015-2016. Total plan assets as of the last fiscal year ends stood at $3.19 trillion, down from $3.24 trillion as of the prior fiscal year ends (generally June 30, 2015). However, market performance since the last fiscal year ends has been strong, and we estimate that aggregate plan assets have jumped to $3.44 trillion as of June 30, 2017. We estimate that the plans experienced a median annualized return on assets of 11.49% in the period between their fiscal year ends and June 30, 2017.

Figure 1: Aggregate system-reported funded status ($ trillions)

click to enlarge

Note: The plan liability amounts from the 2014 and 2015 studies are the accrued liability used for determining contribution amounts; the 2016 and 2017 studies report the GASB 67/68 Total Pension Liability.

The Total Pension Liability reported at the last fiscal year ends totaled $4.72 trillion, up from $4.43 trillion as of the prior fiscal year ends. We estimate that the Total Pension Liability has increased to $4.87 trillion as of June 30, 2017. The aggregate underfunding as of the last fiscal year ends stood at $1.53 trillion, but we estimate that the underfunding has narrowed to $1.43 trillion as of June 30, 2017.

Study technical appendix

Methodology: Expected investment return

For the purposes of this study, we recalibrated liabilities for included plans to reflect discounting at the expected rate of return on current plan assets. To develop the expected rate of return used in these calculations, we relied on the most recently available asset statements for each plan, particularly on Statements of Plan Net Assets as disclosed in published Comprehensive Annual Financial Reports. We did not make adjustments for potential differences between actual asset allocations and target policy asset allocations.

We calculated the expected rate of return using a “building-block method” based on geometric averaging methodology. We used Milliman’s December 31, 2016 capital market assumptions to calculate the 50th percentile 30-year real rate of return, and then added the plan’s inflation assumption to arrive at the total expected investment return on plan assets. Where the plan’s inflation assumption was not available, we used an inflation assumption of 2.50%. We did not make any adjustment to the expected rate of return for plan expenses, nor did we include any assumption for investment alpha (i.e., we did not assume any excess return over market averages resulting from active versus passive management).

Methodology: Liability recalibration

We performed the recalibration of liabilities for pension plans included in the study using the sensitivity information disclosed in published Comprehensive Annual Financial Reports. Where this information was not available, we made adjustments based on available information.

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