Alaska targets Mercer in pension lawsuit

Actuaries under scrutiny as markets drop and more pressure put on pension plans
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 04/07/2009

As funding for pension plans is increasingly scrutinized by employers, the role and responsibility of actuaries has crept into the spotlight. Most noticeably, Alaska announced in December it is seeking more than $1.8 billion US in damages from Mercer, accusing the HR consulting firm of “misconduct, negligence and inattention” in calculating the expected liabilities of two major pension plans in the state.

For almost 30 years, Mercer acted as actuary for the plans, which cover more than 80,000 retired and active participants and had an unfunded liability in June 2006 of about $8.4 billion US. Mercer provided valuation reports setting forth the actuarial value of the plans’ assets and liabilities and calculated and recommended employer contribution rates.

The most significant errors had to do with health care-costs and coding, says the state, as Mercer did not use health-care actuaries, underestimated the growth of health-care costs and “made fundamental errors in methodology and even in basic calculations, and failed to assign competent, experienced personnel to work for the plans.”