SACRAMENTO, Calif. (AP) — The nation’s largest public employee pension system beat its investment earnings target last year for the second consecutive time.

The California Public Employees Retirement System reported a preliminary return Thursday of 8.6 percent for the fiscal year that ended June 30. That beats fund managers’ 7 percent target and avoids even higher costs to public employers.

Higher returns help public employers including the state, school districts and local governments that still face steep increases in their pension costs to fill the gap between assets and promised benefits.

CalPERS reported $351 billion in assets, enough to cover 71 percent of payments owed to its 1.9 million members. That’s up 3 percentage points from the previous fiscal year.

The gains were driven by double-digit returns in public and private equity markets.

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