US - The US$5.6bn New Hampshire Retirement System (NHRS) has urged the state attorney general to review a recent Alaskan lawsuit to see if there could be a case to be made against its own past actuarial advisers.
Over the past five months, a study commissioned by the NHRS conducted a comprehensive review of the system's funding, benefits, and investment results, as well as its current financial status and governance structure.
The resulting report stated: "The commission recommends that the attorney general's office review the lawsuit, Alaska versus Mercer US, Inc., to determine if there are any parallels with the NHRS experiences, and to proceed accordingly if she determines there may be a cause of action."
The lawsuit was filed in the Alaska Superior Court by attorney general Talis Colberg and the Department of Law on behalf of Alaska's Public Employees' Retirement System (PERS) and Teachers' Retirement System (TRS).
The suit seeks more than US$1.8bn in damages from Mercer for alleged errors in calculating the pension plans' expected liabilities, including mistaken actuarial assumptions and methods of calculating future healthcare costs, as well as basic mathematical and technical errors.
Mercer has stated in response to the Alaska suit: "Mercer stands behind the quality of its actuarial work for the State of Alaska and will defend its interests vigorously."
The study into the NHRS concluded it had an unfunded liability of $2.6bn that would have to be paid over the next 30 years.
It showed certain flaws in the system which could be traced back to legislative action in 1991, when it adopted the Open Group Aggregate (OGA) funding methodology.
The report said the OGA method had overstated the funding level, which in turn had led to lower employer contribution rates than necessary for an extended period.
The report showed that in 1999 the trust appeared to be 110% funded according to the OGA methodology, while the more commonly accepted Entry Age Normal (EAN) methadology showed it was actually just 89.4% funded.
In 2007, the passage of new legislation required the adoption of EAN methodology.
Richard Head, associate attorney general of New Hampshire, said: "We do not have any comment as to whether we would be pursuing an action at this point as it would be premature."
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