Milliman: Largest public pension plans' funding ratio hits 85%

The aggregate funding ratio of the 100 largest U.S. public pension plans reached 85% as of June 30, according to an estimate from the latest Milliman Public Pension Funding Study.

The estimate represents a significant improvement from the estimated funding ratio of 70.7% a year earlier, thanks primarily to excellent market returns, a study report shows. Milliman's estimated median return for U.S. public pension plans for the 12 months ended June 30 was 27%.

Estimated assets as of June 30 totaled $4.82 trillion, up from $3.9 trillion the year before, while estimated liabilities totaled $5.67 trillion, compared to $5.5 trillion the year before.

The estimated unfunded liability of $850 billion is the first time Milliman's estimate has fallen under $1 trillion since 2012, according to the study.

Also according to the study, the number of the 100 U.S. public pension plans whose funding ratios exceeded 90% rose to an estimated 47 plans as of June 30 from 13 plans a year earlier. Meanwhile, the number of plans with funding ratios below 60% fell to an estimated 19 plans from 30 plans a year earlier.The study also shows that as of June 30, the aggregate asset allocation was estimated to be 45% equities (unchanged from 12 months earlier), 23% fixed income (down from 24%), 28% alternatives (unchanged from the previous year) and 4% cash (up from 3% the year before).

The study notes that the latest estimated aggregate asset allocation continues the trend of a very modest and gradual shift to alternative investments from equities. The report noted that in 2013, the aggregate allocation to the asset class was 23%.

The report of the study is available on Milliman's website.