Providence, R.I., on Tuesday filed a lawsuit against Buck Consultants, its longtime pension actuary, confirmed David Ortiz, spokesman for Providence Mayor Angel Taveras.
The lawsuit accuses Buck of miscalculating $700,000 of savings the city expected this year through pension reform. “When compounded annually over the next 28 years, the error amounts to $10.8 million in today's dollars,” Mr. Taveras said in a statement.
The city alleges breach of contract, breach of fiduciary duty, negligence and violation of the Rhode Island False Claims Act. The lawsuit claims Buck admitted the mistakes and said it had made other undisclosed calculation errors that accounted for the lost savings.
The Providence Employees' Retirement System had $422 million in assets and $1.325 billion in liabilities as of June 30 for a funded status of 31.85%.
The city requested and obtained several analyses from Buck on how the city could achieve savings through changes to its pension system. Buck projected how much the city would save by freezing pension increases for 10 years, and Mr. Taveras used the assumptions in negotiations, according to the lawsuit filed in U.S. District Court in Providence. The lawsuit claims Buck failed to account for an entire year of cost-of-living adjustment payments, causing the numbers Buck was using to calculate the actuarially required contribution and its expected liabilities to be “wholly incorrect.”
“For the past two years, the city has relied on Buck's calculations to guide our pension reform efforts,” Mr. Taveras said in his statement. “We did not discover Buck's error until late December, after we had already reached a settlement with our unions and retirees. We will not alter the settlement or seek future concessions from Providence's employees and retirees to achieve the lost $10 million.”
“Buck Consultants has valued its long standing relationship with the city of Providence. … However, we have yet to be served with a lawsuit, so it would be inappropriate for us to comment at this time,” said Steven Laird, senior marketing consultant at Buck, in a statement.
Buck has been the city's actuary for more than 90 years.