Ex-actuary denies role in pension shortfall

Posted: Thursday, January 31, 2008

JUNEAU - The former actuary for Alaska's retirement systems has denied responsibility for the state's $8.4 billion pension shortfall.

Mercer (US) Inc. filed a response Tuesday to the state's multibillion dollar lawsuit.

The state is seeking more than $1.8 billion in damages, claiming in part that the company's mistakes in calculating future medical costs contributed to a massive unfunded liability in Alaska's Public Employees' Retirement System and Teachers' Retirement System.

Mercer described the lawsuit as a "misguided and meritless attempt to blame Mercer for investment losses, escalating health care costs and funding policies over which it had no control."

After 30 years advising the state on its public employee and teacher retirement systems, Mercer, a unit of Marsh & McLennan Cos., was replaced as the state's actuary in 2005 by Buck Consultants, which did an extensive recalculation of Alaska's pension and health care liabilities. Buck Consultants found that Mercer had underestimated medical costs by about 7 percent.

Mercer said its estimates were audited and found to be based on sound actuarial principles. Furthermore, it stated that escalating health care costs are a national trend which all actuaries have struggled to predict and gauge.

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