A Maryland judge has ordered a financial consulting company to pay $39 million to the state’s pension fund for miscalculating how much the state owed retirees since the early 1980s.
The $31.8 billion pension fund was initially seeking $73 million from Seattle-based Milliman Inc., which the state hired to calculate its pension contributions for judges, state police, transit police, and other law enforcement officers from 1982 to 2004.
The pension system said Milliman advised the state to pay the fund $34 million less than it owed, causing the system to lose $39 million more in potential earnings from the missing contributions.
The system’s lawsuit says Milliman’s error was rooted in its failure to account for the costs the state would owe surviving spouses of state employees who died.
Milliman says the state is responsible for paying the pension’s losses, saying the company had no liability for a miscalculation. But a judge in June threw out a lawsuit Milliman filed that would have billed the state for the money the company now owes, according to the Friday ruling by Baltimore Circuit Court Judge Alfred Nance.
Nance’s decision cut in half the amount the state was seeking, even though the Maryland State Board of Contract Appeals ruled the 63-year-old company owed the pension system the full $73 million. Milliman has since filed suit to overturn the board’s decision.
Neither the pension system nor Milliman will say whether they plan to appeal Friday’s decision, according to spokesmen and lawyers for both agencies.
The state has long been scraping for dollars to pour into its underfunded pension system. In the last legislative session, the state Senate passed a measure that would have shouldered a portion of teacher pension payments onto local governments, saving the state approximately $330 million by 2015.
But the House forced the measure out of the Senate’s version of the state budget, saying the counties couldn’t afford the payments. Lawmakers instead charged an eight-member commission to study how the state should deal with growing pension costs.
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