(Corrects item from March 28 to show payments are from, not into, the pension system in final paragraph)
* Exposure to international stocks hits new high
* U.S. stock holdings fall 1 pct in Q4 2012 vs Q3
* Total payments total $56.4 bln in Q4
* Earnings on investments reach $67.3 bln
NEW YORK, March 28 (Reuters) - U.S. public pensions reached a milestone in the fourth quarter of 2012 when assets rose to the highest since a peak just before the financial crisis, according to U.S. Census data released on Thursday.
Assets in 100 of the largest funds, including cash and securities, rose to $2.84 trillion, up 1.7 percent from the preceding quarter and 8.6 percent from the fourth quarter of 2011.
That pushed assets to their highest since a peak of $2.93 trillion in the fourth quarter of 2007, before the onset of the financial crisis in 2008.
Earnings on investments totaled $67.3 billion in the fourth quarter of 2012, the census data showed.
The rising stock market has helped pension funds slowly recover since their holdings reached a low of $2.1 trillion in 2009. But in many cases assets have not kept pace with liabilities and many public pension funds are still under funded, sometimes severely.
The shortfall in 109 of the nation's state pension plans, which guarantee retirement for millions of public workers such as police, firefighters and teachers, rose to $834.2 billion in 2012, up from $690.3 billion the previous year, according to a recent report by Wilshire Consulting.
Wilshire's report also showed state pension fund managers are continuing to up their exposure to less conventional assets such as real estate, private equity, hedge funds and commodities as they try to boost their returns and diversify away from over-exposure to volatile equities.
Wilshire's report, issued in early March, used data through the middle of last year. The authors point out that a rallying stock market since then has probably improved the situation.
Fund managers continued to boost their exposure to international equities, which climbed 6.1 percent to $574.1 billion in the fourth quarter, the highest since the survey began collecting data in 2000, the census data showed.
Exposure to international equities from a year ago rose 21.4 percent from $472.8 billion.
U.S. stock holdings in pension funds fell 1 percent to $939.5 billion in the fourth quarter from $949.2 billion the previous quarter, according to the Census data. Stocks made up a third of total holdings of major public pension systems.
The Census Bureau changed the way it classifies assets in the first quarter of 2012. It shifted federal agency securities to federal government securities instead of corporate bonds. It also shunted private equity, venture capital, and leveraged buy-outs to stocks instead of other securities.
The shift makes comparisons with years prior to 2012 difficult in affected asset classes and masks any trend toward alternative assets.
Total payments from the pension systems rose 3.2 percent to $56.4 billion in the fourth quarter over the previous quarter. Payments rose 12.3 percent from the same quarter a year ago, the report showed. (Reporting by Edward Krudy; editing by Grant McCool and Chris Reese)