Actuary's Computer Glitch Costs County $3 Million

July 3, 2003 ( - The San Louis Obispo County Pension Trust is entitled to $3 million in lost investment income due to admitted professional negligence from its former actuary, according to a recent court decision.

>The California Court of Appeals affirmed the lower court ruling that the trust suffered $3 million in losses when the actuaries discovered a computer program being used did not provide for the payout of survivor benefits.    However, the appellate court overturned the lower court, finding the county was not entitled to $11 million in damages, according to Washington-based legal publisher BNA.

>The actuarial firm worked for the trust from 1980 until 1996, when it discovered the computer glitch, which made the county’s contributions to the trust less than they should have been. Additionally, the trust made supplemental benefit distributions for current employees in the belief there was a surplus.

>San Louis Obispo County sued for lost investment income in addition to $11 million in damages.   While the court agreed with the county that the investment losses were due to professional negligence, it rejected the damage request on the grounds that the $11 million was not contributed by to the trust, but instead was used by the county, and therefore was not a loss.

The case is Board of Trustees for the San Louis Obispo County Pension Trust v. William M. Mercer , Calif. Ct. App., No. B153803, unpublished 6/26/03.