Resnick said that "pension funds are conservative investors and the things they buy aren't kicking off yield" that would justify higher investment targets than the ones they are setting now.
"On the bond side, we've been in a sustained low-rate environment," she said. And every time the Federal Reserve talks about raising its benchmark interest rate from nearly zero "it somehow gets pushed back," Resnick said.
And, "no matter if rates rise, they're not going to go from zero to 5 percent overnight. Pension funds are going to be investing in a generally low interest rate environment for a while," she said.
And, "It's also a reflection of the reality of investing in conventional investments," Resnick said. "Assumptions of higher returns are just not realistic nowadays."
Another assumption that public pension funds are making in setting lower investment target rates is that inflation will remain low for some time.
Brainard of the National Association of State Retirement Administrators said that instead of funds assuming that inflation will run at 4 or 4.5 percent annually, many funds are now projecting that inflation will be at 3 or 3.5 percent annually.
Because inflation is factored into the projected rate of investment return for a fund, any reduction in the assumed inflation rate can lead to the the fund reducing its projected rate for its investments.
But a contrary example is in Texas, where a major public pension fund so far has avoided joining the trend of reducing investment projections.
The Teacher Retirement System in Texas, which manages about $132 billion for more than 1.4 million current employees and beneficiaries, reduced its inflation rate assumption last month while reviewing its current investment target rate. TRS, which estimated a 3 percent rate of inflation, now is assuming a 2.5 percent inflation rate.
Despite that reduction in the estimated inflation rate, the TRS board did not reduce its investment target rate, which remains at 8 percent annually. That means that even though inflation is assumed to be lower going forward, TRS believes its investments can produce returns that make up for it.
"There was no recommendation to lower the rates of return," said TRS spokesman Howard Goldman. "I can't remember when it's not been 8 percent."
—Reuters contributed to this report.