Pennsylvania Record

Friday, February 21, 2020

Judge denies request for summary judgment in UPMC's $100 million lawsuit against actuarial firm

Federal Court

By Solange DeLisle | Feb 12, 2020


JOHNSTOWN — A federal judge in Pennsylvania has denied CBIZ Benefits & Insurance Services and actuary Jon Ketzner's motion for summary judgment in a lawsuit claiming CBIZ's neglectful understatement of pension liabilities associated with the University of Pittsburgh Medical Center's acquisition of Altoona Regional Health System resulted in more than $100 million in damages.

The lawsuit stems from alleged oversight of the difference between the amount due to retirees and the actual amount of money Altoona had on hand to make those payments. U.S. District Court Judge Kim Gibson denied the defense in late January.

The lawsuit claims in its 2013 purchase of Altoona, UPMC was faced with more than $100 million in damages because of CBIZ's accounting error. Altoona started dealing with problematic finances in 2008.  At the time, CBIZ was its actuary and recommended a "soft freeze" of its plans.  

Altoona's finance committee and the board of directors adopted CBIZ's proposal. The company never sought a distress termination or a hard freeze of the plans; however, it did report a combined $11.5 million in operating losses over the next five years. From 2009 to 2012, Altoona was short on money and failed to pay at least eight quarterly pension contributions.

The medical center argued that when UPMC began the formal process to buy Altoona, Ketzner said in writing that the plans had no flaws or any other issues. Ketzner testified he created a financial report detailing Altoona's employee benefit plans financial responsibilities, and knew it would go to UPMC. 

The plaintiffs allege two of Ketzner's documents that UPMC relied on weren't accurate and short-changed the plans responsibility by more than $50 million. In 2015, UPMC Altoona had its funding responsibilities recalculated and found it needed to pay more than what was included in Ketzner's report.

CBIZ and Ketzner had asked the court to dismiss what they believe are UPMC's failed claims. Among their arguments, they called the plaintiff's assertions "too speculative" and stated UPMC Altoona didn't suffer damages from its financial assessment.

In a written opinion, Gibson denied their request for a number of reasons, including that the plaintiffs' allegations were not unfounded and that UPMC Altoona can show financial losses.

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