Now in Legal Rebels:
Posted May 21, 2008 01:03 pm CDT
Actuaries who advise governments about pension fund obligations are facing lawsuits when shortfalls arise.
Suits have been filed over rosy economic assumptions made by actuaries advising the state of Alaska, San Diego, Milwaukee County and Evanston, Ill., a suburb of Chicago, the New York Times reports.
The story outlines some of the accusations. The Evanston suit contends an actuary made aggressive assumptions about such things as investment returns. In Alaska, an actuarial firm, Mercer, has been accused of being too optimistic when it assumed that health care inflation would fall to 4.5 percent by 2009. Milwaukee County accuses Mercer of underestimating the costs of new benefits. The Securities and Exchange Commission sanctioned San Diego for securities fraud over its reliance on misleading numbers provided by its actuarial firm. San Diego sued its firm and reached a settlement.
Actuarial predictions are less of an issue in the private sector, where pension funds are highly regulated, the story says. But in the government sector, many economists believe actuaries have underestimated pension costs by as much as a third.