What's $300 billion between friends?

Reuters reports that a new actuarial study by Milliman has taken another look at the funding status of America's 100 largest public pension plans, and earlier estimates likely understated the unfunded status by at least $300 billion.

All totaled, Milliman suggests, the deficit is probably closer to $1.2 trillion. The earlier numbers, the firm says, were based on a median funding level of 75.1 percent; Milliman's more forensic look at the numbers, using different standards to gauge liabilities and assets, puts the median funded level at 67.8 percent.

Oddly, Milliman researcher Rebeccar Sielman, author of the report, said that huge difference was in fact a piece of good news, as it at least demonstrates that America's major public pension systems are being truthful about their financial standings - both good and bad.

Most of the 100 funds tracked by Milliman had set their median rate of return on investments at 8 percent but more recent, post-meltdown years have reduced that to about 3.2 percent per year for the last five years.

According to Reuters, that has fostered a climate where many pension funds are more frequently underreporting their unfunded liabilities, and political critics across the nation have suggested the funds drop their assumed rate of return to a more realistic 5 percent - which could have drastic effects on the unfunded liabilities and the plans' ability to pay benefits in the future.

Instant Insights /

Milliman recomputes public pension gap at $1.2 trillion

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