Public-sector pension plans are getting more realistic with their interest rate assumptions, increasing plan liabilities and reducing funded ratios in 2013, according to a study from Milliman.
The median interest rate used by the plans decreased from 8 percent in the Milliman 2012 Public Pension Funding Study to 7.75 percent in the 2013 study.
According to Milliman, the drop is in line with a generally declining market consensus on long-term investment returns. For the Milliman study, the author of the 2013 report used a 7.47 percent rate instead of the 7.65 percent rate it used in the 2012 study.
Recommended For You
Read also:
Plans report on the size of their assets through market value and actuarial value, which reflects asset smoothing techniques to moderate year-to-year fluctuations in contribution amounts but which may deviate significantly from market value in periods of sizeable market gains or losses.
The 100 plans studied in this report had assets totaling $2.58 trillion on a market value basis and $2.73 trillion on an actuarial value basis.
In the 2012 study, reported assets were $2.51 trillion on a market value basis and $2.71 trillion on an actuarial value basis.
The funded ratio of the plans decreased on both a market value and actuarial value basis from 67.8 percent in 2012 to 66.8 percent in 2013 using the market value of assets and from 73 percent in 2012 to 70.6 percent in 2013 using the actuarial value of assets.
The plans aggregate accrued liabilities were $3.77 trillion, broken down into $1.62 trillion for the 12.6 million plan members who are still working plus $2.15 trillion for the 11.8 million plan participants who are retired and receiving benefits or how have stopped working but have not yet started collecting their pensions.
According to Milliman, the plans have 100 percent of the funds needed to cover payouts to current retirees, but only 27 percent of what is needed to cover the accrued liability for active plan members.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
