On Friday Mercer (US) Inc. announced that it had resolved litigation brought by the Alaska Retirement Management Board (ARMB) on behalf of two Alaska benefit plans, relating to work in the period 1992 to 2004.
The settlement, in which Mercer expressly denied liability, resolves claims against Mercer by the ARMB and the State of Alaska related to this matter, according to Mercer. Under the terms of the settlement agreement, Mercer has agreed to pay $500 million, of which $100 million will be covered by insurance. Mercer had been actuary for the state’s Public Employees’ Retirement System and Teachers’ Retirement System pension plans.
Faced with a pension funding shortfall of $8.5 billion to $10 billion, in 2007 state of Alaska officials accused Mercer, their former actuary, of being responsible for $1.8 billion of the funding gap (see Alaska Funds Sue Mercer over Actuarial Work). Alaska officials had charged that Mercer had given the state negligent advice (and with making basic math errors). Mercer had been the state’s actuary for nearly 30 years until being replaced in 2005. Last December a superior court judge in Alaska denied Mercer’s request to dismiss the lawsuit (see Judge Denies Mercer’s Request to Dismiss Alaska Suit).
According to a press release, Mercer said it concluded that a settlement was in the best interests of the company and its stakeholders “for several reasons, including: the uncertainty of the outcome of a jury trial in Juneau, with its high concentration of plan participants; the complex technical nature of the claims; and the fact that the plaintiffs were seeking at least $2.8 billion in damages”.
In a news release announcing the settlement, the state acknowledged that some of the liabilities were caused by the stock market crash that accompanied the collapse of the Internet technology boom early in the past decade and by rapidly growing health care costs. Alaska Attorney General Dan Sullivan said that, minus court costs and fees for outside attorneys, the state public pension systems will get about $403 million of the settlement.
The case is Alaska Retirement Management Board v. Mercer, 1JU-07-0974, Alaska Superior Court (Juneau.)