US - Mercer has said it will "vigorously" defend a $1.8bn law suit by the State of Alaska, which alleges the actuary made mistakes in calculating the state pension plan's expected liabilities.
The suit seeks more than $1.8bn in damages from Mercer for alleged errors in calculating the pension plans' expected liabilities, including mistaken actuarial assumptions and methods about future health care costs, as well as basic mathematical and technical errors.
Colberg noted: "Just like any other professional, Mercer was required to use due care, skill and diligence in advising the state how to keep its retirement plans financially sound.
"When it came to calculating expected health care costs for the plans, and in other areas, Mercer failed to meet those standards and caused a significant part of the current unfunded liability of the plans."
Annette Kreitzer, commissioner, Department of Administration, and a trustee of the Alaska Retirement Management Board, added: "This is an important matter not only for the State of Alaska, but also for the 161 other political subdivision employers who participate in PERS and the 58 school district employers who participate in TRS, all of whom were severely harmed by Mercer's errors."
The unfunded liability of the PERS and TRS plans as of 30 June 2006, totalled approximately $8.4bn.
Mercer has said in a statement: "Mercer stands behind the quality of its actuarial work for the State of Alaska and will defend its interests vigorously."
It added the state's funding issues were caused by a number of economic factors, including skyrocketing medical costs, a downturn in the capital markets and employees retiring earlier and living longer than anticipated.
Mercer said, in 2002, it advised the state to significantly increase its contributions to the retirement systems.
"The state is now attempting to hold Mercer accountable for these economic trends, over which our firm has no control," the statement said.
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