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  • Retired public employees may pursue “aiding and abetting” claim
    Posted On: Dec 03, 2014

     In Nasrawi v. Buck Consultants LLC, a California Court of Appeals decided that retired public employees may seek relief against an actuarial firm, where the plaintiffs claim that the actuarial firm aided and abetted a pension fund’s alleged scheme to deliberately underfund the pension plan. 

    For those less familiar with the term “actuaries,” they are the experts hired by pension funds to calculate how much must be contributed to a fund by an employer to insure there will be enough money in a fund to pay for promised pensions when employees retire.

    According to the plaintiffs in Nasrawi, the pension fund  breached its fiduciary duty to the beneficiaries for several reasons , including  using an unrealistic assumed  rate of return; on investments;  adopting a schedule of negative amortization of the system’s unfunded liability for earned benefits; intentionally keeping the fund less than 90 percent funded to avoid employer contributions for cost-of-living adjustments; using pension fund assets to substitute for employer contributions; and transferring assets from non-valuation reserves to valuation reserves).  In other words, the allegations are that the actuaries “fixed” their calculations to reduce what the employer was required to contribute for pensions.

    The plaintiffs claimed that the actuarial firm knew of these practices and falsely represented to the beneficiaries that these practices were actuarially sound.  The actuarial firm argued, to the contrary, that the plaintiffs could not bring a lawsuit against the firm. 

    At this time, the Nasrawi court has not ruled in favor of the plaintiff retired public employees, but what it has decided is that the retired public employees may proceed with their lawsuit against the actuarial firm.

    For questions regarding this case, public employees or their pensions, please contact your labor law counsel. 

    By Anne Yen | December 3, 2014

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