Suburban actuary who calculated pension contributions (often too low) suspended for 2 years

 
 
Updated 10/31/2018 7:40 PM
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A suburban actuary whose recent consulting work included public pension funds in Elgin has been suspended for two years.

Timothy W. Sharpe of Geneva was disciplined by the American Academy of Actuaries "for materially failing to comply with precepts ... of the code of professional conduct in connection with valuations he performed for several municipal police and fire pension plans in Illinois," including "making inappropriate adjustments to published mortality tables," according to a notice of public discipline in August.

Public discipline by the academy is rare. The group that reviews alleged violations, the Actuarial Board of Counseling and Discipline, recommended that in only 41 of 1,716 cases since 1992, records show.

David Mendes, the academy's assistant director of communications for public affairs, declined to say who filed a complaint about Sharpe or provide more specifics about his actions.

Sharpe did not return a request for comment. His former suburban clientele included Oak Brook, Naperville and Hoffman Estates.

A key component of actuarial reports is the "actuarially determined contribution," or how much the actuary determines local governments should contribute annually to pension funds. The ultimate decision is up to local governments. State law requires 90 percent funding by 2040.

Over the years, Foster & Foster Actuaries and Consultants has taken over "a number" of funds across the state that Sharpe worked on, actuary Jason Franken said.

"Usually we come up with a contribution requirement that is higher than what he was providing," Franken said. "That has generally been the case, but it does vary significantly from one location to the other."

In Naperville, where Foster & Foster took over after Sharpe left in 2016, and Hoffman Estates, where he was followed around 2014 by the firm Lauterbach & Amen, the new recommended pension contributions didn't change significantly, officials said.

When Foster & Foster took over the Oak Brook firefighters pension fund actuarial report after Sharpe in 2014, the recommended contribution jumped by 48 percent, village documents show. The Oak Brook police pension fund was taken over by Eisenberg & Associates, which recommended a 23 percent contribution increase in 2014.

Oak Brook officials said Sharpe was contracted separately by the village and police and fire pension boards. His contracts weren't renewed because his studies for the village consistently yielded lower recommended contribution amounts, village officials said.

Franken said his firm's differences with Sharpe's assessments often were due to different assumptions. Those are estimations about investment returns, payroll increases, life expectancy and more.

Assumptions greatly affect actuarial calculations, said Rachel Musiala, director of finance for Hoffman Estates.

"There are about a dozen assumptions that go into that calculation. Any of those, if they change, it will impact your contribution," she said. "The actuary gives recommendations, but it's really up to the municipality and the pension fund to determine what assumptions they are comfortable with."

Sharpe had prepared actuarial valuation reports for Elgin's police and fire pension funds since 1998. The city issued a request for proposals for actuarial services in September. Lauterbach & Amen recently was selected, city spokeswoman Molly Center said.

When asked about Sharpe's actuarial reports, Center said, "We have no reason to believe there are any issues with the police and fire pension."

She declined to elaborate, and CFO Debra Nawrocki didn't respond to a request for comment. The actuarial reports are part of the city's annual audit.

If Sharpe wants to resume his academy membership after the two-year suspension, he must undergo professionalism counseling and be recommended for reinstatement, the discipline notice stated.

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