Financial analyst sued for calculations on retirement funds
Buck Consulting, the firm that did the financial analysis for Gov. Bobby Jindal’s state retirement system revamp proposals, has been sued by Providence, R.I., for pension savings miscalculations.
Buck has a $600,000 state contract that ends in June.
Louisiana Commissioner of Administration Kristy Nichols said she is not worried about Buck’s work for the state because all the assumptions it used in calculations were made public “for any other actuary to validate at any time.”
That type of transparency makes her confident of Buck’s work, she said.
Nichols said the administration chose Buck Consulting because the legislative auditor has used the firm’s services in the past, “and they’ve been correct and understand Louisiana and our systems.”
“We did reach out to Buck on the lawsuit,” Nichols said. Buck officials said that no one on the Providence team is involved in Louisiana work, she said.
“We are confidant Buck Consultant’s analysis is accurate,” Nichols said.
Legislative Auditor Daryl Purpera said his office used Buck in 2010 to analyze a potential defined contribution benefit pension plan. The firm determined there would be a cost, he said.
“I don’t think you can equate the work they did for us with the work they did for them,” Purpera said. “We stressed all the time we are independent.”
The New York-based Buck has been the actuary for the city of Providence since the 1920s.
The lawsuit, filed earlier this week, accuses Buck of miscalculating $700,000 in savings the city expected from pension revamp efforts this year. The mistake amounts to $10.8 million in today’s dollars over the next 28 years, Providence Mayor Angel Taveras said in a statement.
Providence alleges that Buck breached its contract and fiduciary duty as well as negligence and violation of the Rhode Island False Claims Act.
Buck’s contract with the Jindal administration started out at $400,000 but was bumped up to a maximum $600,000 as it continued work on proposals affecting current and future state employees the governor pushed during the 2012 legislative session.
Jindal said the current pension system is “unsustainable.” He noted the unfunded accrued liability of two major statewide retirement systems which demands higher and higher state contributions.
The proposals that would have had current employees pay more, work longer for a reduced pension benefit died. The so-called “cash balance” plan for employees hired after July 1, 2013, cleared the Legislature but is now subject of a court challenge by the Louisiana Retired State Employees Association.
“The scope of the contract has not changed. They continue to advise us on the cash balance plan,” Nichols said.
In Louisiana, Buck’s calculation is at the heart of a lawsuit challenging the way in which the Legislature passed the state’s new 401(k)-type pension system for future employees.
Buck projected no new state costs while the Legislature’s actuary said there would be expenses.
Added expense triggers a two-thirds vote requirement, which was not achieved in the Louisiana House.
A state district judge threw out the law, siding with the Legislature’s actuary and ruling it did not get the constitutionally required vote.
The Jindal administration is sticking by the Buck analysis and appealing the judge’s ruling to the Louisiana Supreme Court.