Md. court upholds $73M judgment against actuarial firm
BALTIMORE (Legal Newsline) - Maryland Attorney General Douglas Gansler and State Treasurer Nancy Kopp announced a ruling on Wednesday upholding that an actuarial firm is liable to the state's retirement system.
The Maryland court of appeals ruled that Milliman Inc., the actuary for the Maryland State Retirement and Pension System from 1982 to 2006, is liable for damages of approximately $73 million resulting from the firm's repeated errors in performing actuarial valuations for the Judges' Retirement System, the State Police Retirement System and the Law Enforcement Officers' Pension System.
The company is liable to the system for failing to include in its calculations benefits paid to the surviving spouses of participants in these systems.
"This is a victory for Maryland state employees and the retirees who depend on a sound retirement system in their golden years," Gansler said. "I'm grateful for the exceptional work of the assistant attorneys general whose dedication to this case just confirmed our assertion that outside contractors hired by the state will be held accountable for the serious and costly mistakes they make."
Milliman was under contract to perform annual actuarial valuations and to certify to the system's board of trustees the amount of state contributions that would be required to fund future liabilities. The court affirmed the decision of the Maryland State Board of Contract Appeals, which had concluded that Milliman made a mistake that was in breach of the professional standards that actuaries are obligated to meet in their work. The board also decided that Milliman's mistake continued undetected for 22 years and that the continuing mistake by Milliman was a breach of its contracts with the system.
"We are pleased with the outcome," Kopp said. "Today's decision by the court of appeals offers further proof that we take our fiduciary responsibilities seriously and that we will pursue all avenues to protect the system for our members and their families."
The $73 million in damages represents the value of the contributions and investment earnings on those contributions that were lost to the system as a result of Milliman's continuing errors.