Title: Milliman, Inc. v. State Ret. & Pension Sys.

State: maryland

Issuer: Maryland Supreme Court

Document:

Milliman, Inc. v. Maryland State Retirement and Pension System, et al., No. 102, September
Term 2010.
ADMINISTRATIVE LAW  – JUDICIAL REVIEW – ACTUARIAL STANDARD OF
CARE
Actuary was liable to the Maryland State Retirement System for repeatedly misinterpreting
a data code associated with survivors’ benefits.  
ADMINISTRATIVE LAW – JUDICIAL REVIEW – MARYLAND STATE
RETIREMENT SYSTEM – IDENTITY OF STATE AND SYSTEM
Because the State was not a party before the Board of Contract Appeals, whether the
measure of damages should reflect the State’s use and benefit of contributions not made to
the System as a result of the actuary’s errors was not properly before the Court of Appeals. 
The Circuit Court erroneously reduced the Board’s damage award by $34,200,000,
representing lost contributions, and the Court of Appeals vacated the judgment of the Circuit
Court and directed that the Board’s decision be affirmed.
ADMINISTRATIVE LAW – JUDICIAL REVIEW – ACTUARIAL STANDARD OF
CARE – MARYLAND STATE RETIREMENT SYSTEM – MEASURE OF
DAMAGES – CONTRIBUTORY NEGLIGENCE
The System was not negligent in the development or transmission of data provided to
Milliman. 
IN THE COURT OF APPEALS OF
MARYLAND
No. 102
September Term, 2010
MILLIMAN, INC.
v.
MARYLAND STATE RETIREMENT
AND PENSION SYSTEM, et al.
Bell, C.J.
Harrell
Battaglia
Greene
Murphy
Adkins
Barbera,
JJ.
Opinion by Battaglia, J.
Harrell, Murphy and Adkins, JJ., dissent.
Filed:   July 20, 2011
In this case, we are tasked with reviewing a decision of the State Board of Contract
Appeals, which determined that Milliman, Inc., Appellant, (“Milliman”), had breached
contracts to provide actuarial services  to the Maryland State Retirement System, Appellee,
1
(“the System”), allegedly resulting in approximately $73 million in losses to the System as
a result of a claim that the System had filed against Milliman pursuant to Section 15-219.1
of the State Finance and Procurement Article, Maryland Code (2001, 2006 Repl. Vol.);  the
2
An “actuary” is a “statistician who determines the present effects of future
1
contingent events; esp[ecially] one who calculates insurance and pension rates on the basis
of empirically based tables.” Black’s Law Dictionary 41 (9th ed. 2009).   See also William
D. Hager and Paul-Noel Chretien, The Emerging Law of Actuarial Malpractice, 31 Drake
L. Rev. 831, 831-32 (1981-1982) (“Using mathematical skills to define, analyze and solve
complex business and social problems, the actuary designs insurance and pension programs
and is responsible for their financial soundness.  These programs create long-term financial
obligations of often enormous magnitude dependent on the actuary’s forecasts of
probabilities and economic developments.”)
Section 15-219.1 of the State Finance and Procurement Article, Maryland Code
2
(2001, 2006 Repl. Vol.), provides the procedure of a contract claim against a contractor, as
follows:
(a) Written notice; contents; procedure upon receipt of claims.
– (1) A unit may assert a contract claim against a contractor by
sending written notice to the contractor and the procurement
officer that states:
(i) the basis for the contract claim;
(ii) to the extent known, the amount, or the performance or other
action, requested by the unit in the contract claim; and
(iii) the date by which the contractor is required to provide a
written response to the contract claim.
(2) On receipt of a contract claim from a unit, a procurement
officer:
(i) shall review the substance of the contract claim;
(ii) may request additional information or substantiation through
an appropriate procedure; and 
(continued...)
claim asserted that Milliman had understated the contributions required to fund three of the
State’s ten retirement and pension systems because of the actuary’s misinterpretation of a
particular data code.
In the initial round of the administrative action, the Retirement System Procurement
Officer determined that Milliman had “failed to comply with its contractual duties and
responsibilities,” and that the System was entitled to recover “$34.2 million in contributions
that would have been received but for Milliman’s errors, and $38.8 million in lost income
that would have been earned on those contributions.”  Thereafter, Milliman appealed to the
State Board of Contract Appeals, which heard the claim de novo and determined that in
failing to detect and correct the coding error for a period of twenty two years, the actuary 
had substantially breached its contracts with the System, causing the three affected
(...continued)
2
(iii) may discuss or, if appropriate, negotiate the contract claim
with the unit or contractor.
(3) The procurement officer shall proceed under subsection (b)
of this section if the contractor fails to respond, provides an
inadequate response, or denies the contract claim or the relief
sought by the unit in whole or in part.
(b) Proposed decision upon claim when no resolution is
reached. – (1) If the contractor and the unit do not resolve the
contract claim, the procurement officer shall prepare a proposed
decision on the contract claim, including:
(i) a description of the contract claim;
(ii) references to pertinent contract provisions;
(iii) a statement of factual areas of agreement or disagreement;
and
(iv) a statement in the proposed decision wholly or partly
granting or denying the relief sought, with supporting rationale.
2
retirement funds to be significantly underfunded, amounting to $34,208,960 in lost
contributions and $38,756,188 in lost interest on those contributions.
Milliman filed a petition for judicial review in the Circuit Court for Baltimore City,
which affirmed the Board’s findings that Milliman had breached its contracts with the
System and affirmed the award of lost investment earnings, but reversed the Board’s award
of amounts equaling lost contributions.  We granted certiorari prior to any proceedings in
the intermediate appellate court to consider the following questions:
1. Can an actuarial funding recommendation for a state pension
system, even one that contains an error, cause damages when it
is undisputed that the funding recommendation resulted in
contributions being received by the pension system that always
met or exceeded statutory funding goals?
2. In determining the measure of damages, what is the legal
relationship between the State of Maryland (the “State”) and the
Maryland State Retirement and Pension System (the “System”):
are they separate, so that future contributions and earnings made
by the State to the System must be considered in assessing
damages to the System, or are they related so that any loss to the
System must be offset by the gain retained by the State?
3. When applying the contributory negligence doctrine, must a
trier of fact consider only expert testimony, or should factual
evidence showing that the plaintiff contributed to the harm be
considered and evaluated under a reasonable person standard?
The State Retirement and Pension System presented a conditional cross-petition, which we
also granted, in which one question was posed:
Did the MSBCA [Maryland State Board of Contract Appeals]
correctly assess damages, and did the circuit court erroneously
reduce the MSBCA’s damage award by $34,200,000 by
3
employing an incorrect standard of review and adopting a theory
that departs from well-established principles of Maryland law to
find that the State of Maryland must pay the contribution portion
of the damages caused by Milliman’s breach, even if doing so
would require the State to pay far more in contributions than it
would have had to pay if Milliman had not breached its
contracts?
Milliman, Inc. v. Maryland State Retirement and Pension System, 417 Md. 125, 9 A.3d 1
(2010).  We shall hold that Milliman is liable to the System for repeatedly misinterpreting
a data code associated with survivors’ benefits, irrespective of whether the System met
funding goals during the contracts.  We shall further hold that because the State was not a
party before the Board of Contract Appeals, whether the measure of damages should reflect
the State’s use and benefit of contributions not made to the System as a result of Milliman’s
errors is not properly before us.  In addition, we shall hold that the System was not negligent
in the development or transmission of data provided to Milliman and, therefore, contributory
negligence does not bar the System’s recovery.  Finally, we shall hold that the Circuit Court
erroneously reduced the Board’s damage award by $34,200,000, representing lost
contributions, and therefore, shall vacate the judgment of the Circuit Court and shall direct
that the Board’s decision be affirmed.  
Introduction
A state or local government retirement system is designed, fundamentally, to fund the
long term cost of providing benefits to employees.  Thomas P. Bleakney, Retirement Systems
for Public Employees 33 (Univ. of Penn. Press 1972).  The latter is so, because, “there is a
4
time lag between the accruing of pension rights and the payment of benefits.”  Id. at 14.  
Retirement benefits are funded by the interplay of three sources, namely, contributions from
the employer, contributions from the employee, and investment income.  Employer
contributions are calculated, moreover, so that over the long run, annual contributions plus
investment earnings are sufficient to pay out the promised benefits.  The Top 10 Advantages
of Maintaining Defined Benefit Pension Plans, http://www.macrs.org/news/96-the-top-10-
advantages-of-maintaining-defined-benefit-pension-plans.html (last visited July 16, 2011). 
In this way, the financial workings of a public employee retirement system have been
compared to a water network, with the system’s funds represented by a reservoir:
Inputting to this reservoir are three flows: employee money,
employer money, and earnings on the investments of the fund. 
The outflow is for benefit payments and administrative
expenses.  So long as the reservoir is not empty, the system will
continue to operate.  Because the input from employee
contributions and investment earnings is not easily altered,
proper design of the system requires anticipation of the expected
outflow in advance, so that the demands on the employer can be
scheduled.  This is the essential scope of financing
techniques–measuring the anticipated outflow and regulating the
rate of input of employer contributions into the fund.
Bleakney, supra, at 106-07.    
Actuaries come into a retirement process because they focus primarily on “analyzing
the financial consequences of future uncertain events.”  Michael A. Bean, Probability: The
Science of Uncertainty 6 (American Mathematical Society 2001).  In the pension context,
actuaries perform complex calculations to ensure that employer contributions are sufficient
5
to fully satisfy the liabilities of a fund over time, despite fluctuations in investments and the
steadily growing number of retirees.  The Top 10 Advantages of Maintaining Defined Benefit
Pension Plans, http://www.macrs.org/news/96-the-top-10-advantages-of-maintaining-
defined-benefit-pension-plans.html (last visited July 16, 2011).  In formulating estimates of
employer contributions, “planning for error is part of the calculation,” and actuaries often
employ “a degree of conservatism in [their] assumptions,” erring on the side of over-funding
rather than under-funding.  Rhoades, McKee & Boer v. United States, 43 F.3d 1071, 1075
(6th Cir. 1995). 
In Maryland, the State Retirement and Pension System is composed of ten
independent retirement systems,  although only three were the subject of the challenge
3
Section 21-102 of the State Personnel and Pensions Article, Maryland Code
3
(1993, 2004 Repl. Vol.), provides:
The State Retirement and Pension System consists of:
(1) the Correctional Officers’ Retirement System, established on
July 1, 1974;
(2) the Employees’ Pension System, established on January 1,
1980;
(3) the Employees’ Retirement System, established on October
1, 1941;
(4) the Judges’ Retirement System, which consists of:
(i) the contributory plan, established on July 1,
1969; and
(ii) the noncontributory plan, established on April
7, 1904;
(5) the Legislative Pension Plan;
(6) the Local Fire and Police System, established on July 1,
1989;
(continued...)
6
initiated by the State against Milliman, those being the Judge’s Retirement System, the State
Police Retirement System, and the Law Enforcement Officers’ Pension System, all of which
are managed by a Board of Trustees, which includes the Secretary of Budget and
Management, the State Comptroller, the State Treasurer, and elected or appointed
representatives of each retirement system.  Pursuant to Section 21-125(a) of the State
Personnel and Pensions Article, Maryland Code (1993, 2004 Repl. Vol.),  the Board of
4
Trustees “shall designate an actuary” to:
(1) give technical advice to the Board of Trustees on the
operation of the funds of the several systems; and
(2) perform other related duties that the Board of Trustees
requires.
The designated actuary is required to make an annual “valuation of the assets . . . of the funds
of the several systems,” upon which the State’s (the employer’s) contributions to the System
are based:
(...continued)
3
(7) the Law Enforcement Officers’ Pension System, established
on July 2, 1990;
(8) the State Police Retirement System, established on July 1,
1949; 
(9) the Teachers’ Pension System, established on January 1,
1980;
(10) the Teachers’ Retirement System, established on August 1,
1927; and
(11) any other system or subsystem that the Board of Trustees
administers.
All references to the State Personnel and Pensions Article throughout are to
4
Maryland Code (1993, 2004 Repl. Vol.), unless otherwise noted, although the pertinent
provisions remain unchanged in the 2009 Replacement Volume.
7
(b) Annual valuation. – (1) On the basis of actuarial assumptions
that the Board of Trustees adopts, each year the actuary shall
make a valuation of the assets and liabilities of the funds of the
several systems.
(2) Each year the Board of Trustees shall certify to the Secretary
of Budget and Management and to the Governor the rates of
employer contributions.
Section 21-125(b) of the State Personnel and Pensions Article.  Moreover, Section 21-304
of the State Personnel and Pensions Article establishes a statutory goal for the System to have
its obligations to participants fully funded by the year 2020, as follows:
(d)(1) Beginning July 1, 2001, each year the Board of Trustees
shall set contribution rates for each State system that shall
amortize: 
(i) all unfunded liabilities or surpluses accrued as of June 30,
over 20 years; and
(ii) any new unfunded liabilities or surpluses that have accrued
from July 1 of the proceeding fiscal year over 25 years to reflect:
1. experience gains and losses;
2. the effect of changes in actuarial assumptions; and
3. the effect of legislation effective on or after July 1, 2001.
Background
Milliman contracted with the System beginning in 1982 to provide actuarial valuations
for each of the State’s retirement and pension systems and continued to serve as actuary by
additional contracts effective July 1, 1990, July 1, 1993, and August 5, 1998, to terminate as
they did, August 4, 2006.  The contracts required Milliman to perform valuations of the
various funds, as well as an “annual certification of the employer contribution rate required
to fund each retirement system for the coming year.”  Milliman assured the System that the
actuary “subscribe[d] to the concept that the annual actuarial valuations are the cornerstone
8
of all financial planning of a retirement system.  As such we take great care in assuring that
all technical aspects of the valuation are completed.”  
In 2004, Milliman discovered, through a “replication audit,”  a coding error affecting
5
the three retirement systems, in which the actuary failed to include in its calculations benefits
payable to surviving spouses of judges and police officers.  Thereafter, Milliman reported
its discovery of the valuation errors to the System and indicated that liabilities for the three
affected systems had been understated by more than $130 million.  To provide expert advice
concerning the longstanding actuarial error, the System retained the Hay Group, “a global
human resource management consulting firm,” which examined Milliman’s work and
determined that “Milliman’s errors did result from their failure to apply reasonable standards
of care as would have been expected of an actuary at that time.”  
By formal authorization of its Board of Trustees, the System approved the filing of
an administrative claim against Milliman pursuant to Section 15-219.1 of the State Finance
According to the testimony of Brent Mowery, an actuary with the Hay Group,
5
Milliman discovered the coding error through an “internal audit”:
They had another office do essentially an attempt to replicate the
valuation performed by the office responsible for the Maryland
valuations.  And so that apparently sometime prior to
finalization of the 2004 results in October identified internally
we’ve got a problem.  Milliman Philadelphia gets a different
result from Milliman DC.  And they dug into it and said
Milliman DC doesn’t quite have it right.
9
and Procurement Article, Maryland Code (2001, 2006 Repl. Vol.).   The Retirement System
6
Procurement Officer determined that Milliman had breached its actuarial responsibility,
resulting in $73 million in losses to the System, and Milliman appealed to the Board.  
The Board of Contract Appeals determined that Milliman substantially breached its
contracts with the System by failing to exercise reasonable care and diligence in interpreting
data in connection with the three affected retirement systems, in contravention of the
Section 15-219.1 of the State Finance and Procurement Article, Maryland Code
6
(2001, 2006 Repl. Vol.), governing a “[c]ontract claim against a contractor,” provides, in
pertinent part:
(2) On receipt of a contract claim from a unit, a procurement
officer: 
(i) shall review the substance of the contract claim; 
(ii) may request additional information or substantiation through
an appropriate procedure; and 
(iii) may discuss or, if appropriate, negotiate the contract claim
with the unit or contractor.
(3) The procurement officer shall proceed under subsection (b)
of this section if the contractor fails to respond, provides an
inadequate response, or denies the contract claim or the relief
sought by the unit in whole or in part.
(b) Proposed decision upon claim when no resolution is
reached. — (1) If the contractor and the unit do not resolve the
contract claim, the procurement officer shall prepare a proposed
decision on the contract claim, including: 
(i) a description of the contract claim;
(ii) references to pertinent contract provisions; 
(iii) a statement of factual areas of agreement or disagreement;
and
(iv) a statement in the proposed decision wholly or partly
granting or denying the relief sought, with supporting rationale.
10
professional actuarial standard of care:
76. As actuarial customs and practices have evolved and become
generally accepted standards of care, they have been reduced to
writing and adopted by appropriately accredited professional
associations as statements of duties and responsibilities required
to be employed by actuaries in the course of rendering
reasonable actuarial care and advice.
77. The actuarial Guides to Professional Conduct originally
written in 1969 was replaced in 2005 by the actuarial Code of
Professional Conduct and in addition to those learned treatises
expressing accepted written statements of actuarial professional
standards, since the late 1980s, the generally accepted
professional standards of care for the actuarial profession have
been established, written and promulgated by the Actuarial
Standards Board (ASB), the successor professional organization
to the American Academy of Actuarials.
78. In addition to the officially adopted and promulgated written
standards of care for the actuarial profession, there are also
generally accepted standards of practice for actuaries which are
unwritten but nonetheless constitute professional standards of
care which contribute to expert assessment of how the requisite
standard of professional care must be exercised in particular
actuarial settings.
79. The following written expressions of standards of
professional actuarial care in these Findings of Fact were
applicable at all times relevant to the issues presented in this
appeal even though they may not have been formally written and
adopted until after the time at which breach of the written
standard is here alleged to have occurred.
80. The historic Guides to Professional Conduct adopted by the
American Academy of Actuaries states: “The actuary will act for
each client or employer with scrupulous attention to the trust and
confidence that the relationship implies and . . . [t]he actuary
will exercise his best judgment to ensure that any calculations or
recommendations made by him or under his direction are based
on sufficient and reliable data.”
81. Actuarial Standard of Practice (ASOP) No. 4 pertaining to
recommended practices for data analysis, developed by the
Pension Committee of the Actuarial Standards Board, and
11
adopted by the full Actuarial Standards Board in October 1993
provides, “5.2.2 – All provisions of the plan adopted and
effective on or before the start of the plan year should be taken
into account in measuring pension obligations.”
82. ASOP No. 4 further provides: “5.2.3(a) – The actuary will
generally rely on the plan administrator, plan sponsor or other
qualified third party for asset and participant information. 
While not responsible for auditing the information, the actuary
should verify its reasonableness both directly and against other
available information, such as prior years’ data and reported
benefit payments.  If the actuary is not satisfied as to the
reasonableness of the information, further inquiry should be
made until the actuary is so satisfied.”
83. ASOP No. 23 pertaining to data quality was initially written
in the mid 1990s, refined by the General Committee of the
Actuarial Standards Board, and adopted by the full Actuarial
Standards Board in December 2004 to apply to all actuarial
practice areas, stating: “3.4 – Reliance on Other Information
Relevant to the Use of Data – In many situations, the actuary is
provided with other information relevant to the appropriate use
of data such as contract provisions, plan documents and
reinsurance treaties.  The validity and comprehensiveness [as
contrasted to clarity] of such information are the responsibility
of those who supply such information.  
The Board also found that Milliman had misinterpreted retirement code “00,”
resulting in an understatement of contributions necessary to fund three of the State’s ten
retirement and pension funds:
108. Code “00” was in fact a straight life annuity form of benefit
payment for most MSRPS participants, but not for employees
enrolled in the judges or police retirement systems, who also
were provided a 50% surviving spousal benefit in addition to the
single life annuity enjoyed by other retirees.
109. At the hearing in this appeal, a competent, qualified,
practicing actuarial professional offered expert testimony to
support the legal conclusion that the foregoing incorrect
interpretation of MSRPS codes constituted a breach of the
12
applicable standard of professional care on the part of Milliman
as the expert actuarial consultant retained by MSRPS for
actuarial advice and support in 1982. 
110. Milliman was provided by MSRPS with a booklet
describing the benefits payable under the State police pension
plan in which it was stated, “A member of the Maryland State
Police Retirement System with a spouse as of the date of
retirement must elect the maximum retirement allowance . . . At
the retiree’s death, one-half of the monthly retirement allowance
will be paid to the surviving spouse for life.”
* * * 
112. Because the nature of the retirement benefit identified by
code “00” varied depending on the particular retirement system
in which the participant was enrolled, “00” on the retirement
coding tape meant a straight life annuity for teachers, for
example, but for judges and State Police “00” meant a straight
life annuity plus a 50% benefit for surviving spouses as the
maximum or normal form of payment.
113. In its evaluation methodology Milliman failed to recognize
that the code “00” for retired judges and State Police included 
a 50% benefit for surviving spouses in addition to a straight life
annuity.
114. In the course of Milliman’s calculations from 1982 until
2004, Milliman regarded the code “00” as meaning only a
straight life annuity for all of the State’s retirement systems even
though Milliman should have known that the code “00” actually
was not just a straight life annuity for judges and State Police
but also included a continuing 50% benefit for surviving
spouses of participants enrolled in those two (2) particular
retirement systems.
* * * 
173. Milliman discovered in 2004 that it made a coding error in
its methodology for evaluating the Maryland State Police
retirement system initiated 22 years earlier.
174. As a result of Milliman’s discovery in September 2004 of
the coding error for the Maryland State Police due to the
replication audit conducted by Milliman’s Philadelphia office,
Milliman reviewed its methodology on other of Maryland’s
13
retirement systems and learned that the same error was made for
LEOPS [Law Enforcement Officers’ Pension System], judges
and legislators, which, like the State Police, had been evaluated
on the assumption of recipients’ entitlement only to straight life
annuity rather than the more costly benefits associated with dual
lifetime benefits.
175. Milliman admits that it made a coding error in 1982 on a
small fraction of the named beneficiaries and that that coding
error was subsequently replicated each year until October 17,
2004, when the error was discovered and promptly reported to
MSRPS.
176. As a result of the aforementioned coding error, the MSRPS
police and judges retirement and pension plans were
underfunded from 1982 until 2004. 
* * * 
182. Each year from 1982 until discovery of the coding error in
2004, the contribution rates certified by Milliman to MSRPS
were not set in compliance with Maryland’s statutory
requirements for funding the retirement systems enjoyed by
judges and State Police.  
Specifically, the Board found that the affected retirement systems were not on track
to achieve full funding by the statutory 2020 date, but instead, that “the State Police
retirement system was funded at a level of 84% of liability, judges at 74%, and local law
enforcement at 60%,” so that increased contributions to make up for those deficiencies
became necessary.  The Board determined that the sum “needed to make [the System] whole
from the losses sustained as a result of Milliman’s errors,” included approximately $34
million in deficient contributions plus $38.8 million in lost interest on those contributions
during the twenty-two year period:
223. Calculated on the basis of the sum needed to make MSRPS
whole from the losses sustained as a result of Milliman’s errors,
14
and determined within a reasonable degree of certainty, the
damages incurred by MSRPS to the three (3) affected systems
totaled $72,965,148 as of 2005, that figure representing all
funding contribution deficiencies since 1983 resulting from
Milliman’s actuarial calculation errors.
224. The aforesaid $72,965,148 total loss incurred by MSRPS
includes $34,208,960 in deficient contributions over the course
of the 22-year period during which the coding error was made
plus $38,756,188 in lost interest on the investment return on that
deficiency during the period involved, each year compounded.
In so doing, the Board rejected Milliman’s argument that the System was not damaged 
insofar as the taxpayers would fund any deficiency, because that “perspective subvert[ed] the
entire function and purpose of actuarial analysis”:
An additional one of Milliman’s alternative arguments
against the award of any damages in the face of a determination
of breach and liability is that MSRPS is not harmed, because,
notwithstanding 22 years of Milliman’s actuarial errors, it is
undisputed that ultimately the retirement and pension systems
will be fully funded in accordance with law.  Of the $132
million shortfall of which $73 million needs to be repaid over
time in order to accrue with interest and restore the full amount
of that $132 million deficiency by the year 2030, nearly $20
million has already been paid to make up for that deficit.  This
position has some merit in that State tax revenue is used to
achieve future full funding of MSRPS liability, whether or not
the allocation of those State funds is or was made at the
appropriate time, or at some other time.  However, this
perspective subverts the entire function and purpose of actuarial
analysis, which is to determine how much to contribute and
when.
If the Board were to accept this argument, an actuary
could satisfy its contractual obligations to a client by training a
monkey to punch random keys on a calculator.  MSRPS, the
Governor, and Legislature could agree to appropriate the amount
thus randomly determined to be allocated toward pension
funding, with the understanding that some group of State
15
taxpayers sometime in the future would make up the difference
in the event of a deficit or reap the rewards in the event of a
surplus, and the actuary would always be held harmless for any
calculation error, no matter its basis or magnitude.  Certainly,
this is not an acceptable standard of professionalism for
actuaries, nor is it the one in force, nor would its adoption
benefit any actuarial firm, nor does such a lax standard
characterize the usual excellent work of the competent,
impressive, highly trained, skilled, and careful actuarial experts
engaged by Milliman.  Instead, the approval of such an
argument would render actuarial calculations pointless. 
Adopting this position would also undermine the
extremely important statutory objectives of leveling
contributions, protecting inter-generational equity, and pre-
funding defined benefits.  That the losses incurred by MSRPS
have now been amortized and already partially restored is
irrelevant to Milliman’s responsibility because the
reimbursement made to date is from a collateral source, namely
budgets adopted in years subsequent to the years and in different
amounts than the appropriations that should have been made and
would have been made but for Milliman’s error.  
The Board also concluded that, because the State was not a party to the proceeding,
Milliman’s contention that any losses sustained by the System as a result of Milliman’s
calculation errors must be offset by assets that purportedly remained in the State’s General
Fund, was without merit: 
A more persuasive position on the question of damages
was posited by [Timothy F.] Maloney, explained during his
testimony using a “right pocket/left pocket” analogy referenced
in Milliman’s brief as the “unitary creditor doctrine.”  By this
argument, Milliman asserts that the State is a single entity
comprised of many constituent agencies like MSRPS.  Funds
that are taken from the General Fund, or right pocket, and
deposited into sub-entities like MSRPS, the left pocket, do not
result in any gain or loss to the entity itself, only transfers from
one pocket to another in a single pair of pants. 
16
This conception is accurate to the extent that MSRPS is
an appendage of the State of Maryland.  MSRPS is indeed a
component of the State.  It is created by State law.  MSRPS
carries out an important State function upon which State
employees, retirees and their families rely.  The full faith and
credit of the State stands behind MSRPS liabilities.  The State
lists and includes MSRPS funds as a part of its fiduciary assets. 
The State is guarantor of MSRPS obligations.  The Governor of
the State authorizes state revenue to be allocated to MSRPS as
a part of the annual State budget in accordance with State law
and that appropriation is authorized by approval of the State
Legislature.  
However, the State of Maryland is not a party to this
proceeding.  As fully substantiated by examples and succinctly
but effectively expressed by counsel for Milliman in its brief at
page 68, “The System [MSRPS] cannot be heard here to
complain on behalf of the State.  The claim before the Board is
a claim by the System on behalf of the System.  The System has
been adamant in the position that the State is not a party to this
proceeding and has repeatedly taken the position in pleadings
and correspondence that the State is not a party to the claim and
plays no role in this case . . . .  The Board heard no evidence
from the State, or any witness purporting to speak on behalf of
the State . . . .” and at page 21 of its reply brief, “the System
does not speak for the State, or the taxpayers, neither of whom
are parties to this case.”  Or as one might assert using Maloney’s
pants pocket analogy, only the left pocket is a party to this
proceeding.  Impact of the instant decision upon the right
pocket, the General Fund, is irrelevant to the specifically and
deliberately limited claim of the left pocket, MSRPS. 
As a matter of law, funds held by MSRPS are quite
distinct from all other State funds.  As Maloney intimates, the
State maintains many funding pools for which various program
supporters are inclined to view such funds as separate and
independent from the General Fund, sacrosanct from
expenditures other than those for which revenue has been
specifically directed and restricted, the Transportation Trust
Fund or Program Open Space, for example.  Yet, Maloney
would correctly assert, whenever the Legislature is in session, it
is conceivable and possible to change the rules, repeal
17
restrictions and raid funds intended for one purpose in order to
use them for another.  In this sense restricted pots of revenue are
all part of the State’s assets and may legally be transferred for
General Fund use should the Governor and Legislature so desire
and therefore facilitate enactment of a change in law,
irrespective of whether or not such action would constitute good
public policy.  
Finally, the Board concluded that the System was not contributorily negligent, because it was
ultimately Milliman’s professional obligation to “understand the data” and seek clarification
from the System:
The only qualifying obligation on the part of MSRPS as
plan sponsor is accurately to reflect the meaning of its codes as
a part of its data dictionary, which MSRPS achieved when it
provided to Milliman its written Annual Valuation Record and
Codes and Flags memorandum.  Those documents, viewed in
light of the pertinent statutes and employee brochures describing
retirement payment provisions, were sufficient to notify
Milliman fully and fairly of the meaning of relevant MSRPS
codes. Milliman has undoubtedly seen and continues to
encounter innumerable variances in the meaning of a multitude
of alphanumeric codes used by disparate pension plan sponsors. 
Indeed, as more elaborately discussed above in this Decision, to
the extent that the coding used by MSRPS was confusing to
Milliman, the actuary bore the obligation of soliciting further
clarifying information until it accurately understood the
information provided to it by its client.  Having previously
asserted, “the data furnished to us are, in our opinion, sufficient
and reliable for the purposes of our calculations,” Milliman is
estopped from asserting today that the data furnished to it by
MSRPS was deficient.  Though it is certainly true that MSRPS
might have done a different and even a better job with its data
dictionary, it cannot be said as a fair or fitting legal conclusion
that MSRPS was negligent in the development or transmission
of the coded data it provided to its actuary.  As a consequence,
Milliman’s breach of contract is not excused by any conduct on
the part of MSRPS.
18
After Milliman sought judicial review in the Circuit Court for Baltimore City, the
judge affirmed the Board’s decision involving Milliman’s breach, but determined that the
Board erred in calculating damages to include both lost contributions and lost interest on
those contributions:
[T]he State’s argument is right and the Court agrees that 
in fact the obligations in total should not be that of the State and
should be primarily and for the purpose of damages, the
obligation of the true obligor, which is the beaching party which
was not the State legislative body.  It was the actuary.  And that
in so doing, it is that the said systems did not have the ability to
contribute the funds and the responsibility of the Legislature or
the State legislative body is not to make up what in fact would
have been the investment flowing therefrom.
And therefore, the question becomes as to what would
have been the actual investment returns or use benefit to the
systems.
The Court again states that we cannot nor could the
Board speculate as to what investment interest would yield in
the future.  However, in this case, we are not looking at whether
or not in fact the interest in the future would have been 18
percent profit we all wish as we get older, close to retirement. 
Nor is it reasonable to speculate that it would be at 0.25 percent
as in some of the local credit unions, if you would, please – not
that we have any knowledge of those things.  That under the
circumstances in this case the finding of the Board was that
there was $39 million in lost use of the funds based on looking
at that which occurred between 1982 and 2005. 
While the Court recognizes that the systems may believe
and so argue that the party responsible for both of those should
be that of Milliman, this Court finds as a matter of law that in
fact Milliman did breach and is responsible for damages and
defined damages is lost use of those funds for the systems.  And
the lost use by the evidence is $39 million.
The Court finds that it reaches that conclusion as a matter
of law, that by substantial evidence in applying the law on
contracts it is the same figure of $39 million.  The Court
19
therefore affirms in part the decision of the Board that Milliman
did breach its contract and breached its standard of duty as
required under the actuarial standard operations procedure.  Not
quoting each of those, but it’s definitely in the long list of
findings of the said Board; that under the circumstances, the
Court reverses as a matter of law as to the damages and does
find as the substantial evidence that the amount of damage is
$39 million plus all costs in this case to date.
Discussion
Our role in reviewing the final decision of an administrative agency, such as the State
Board of Contract Appeals, is “limited to determining if there is substantial evidence in the
record as a whole to support the agency’s findings and conclusions, and to determine if the
administrative decision is premised upon an erroneous conclusion of law.” Maryland
Aviation Admin. v. Noland, 386 Md. 556, 571, 873 A.2d 1145, 1154 (2005), quoting Board
of Physician Quality Assurance v. Banks, 354 Md. 59, 67-68, 729 A.2d 376, 380 (1999).  In
doing so, our task is to decide whether the Board’s determination was supported by “such
evidence as a reasonable mind might accept as adequate to support a conclusion.”  People’s
Counsel for Baltimore County v. Surina, 400 Md. 662, 681, 929 A.2d 899, 910 (2007); see
also  Mayor of Annapolis v. Annapolis Waterfront Co., 284 Md. 383, 398-99, 396 A.2d 1080,
1089 (1979) (“The heart of the fact-finding process often is the drawing of inferences made
from the evidence. . . . The court may not substitute its judgment on the question whether the
inference drawn is the right one or whether a different inference would be better supported. 
The test is reasonableness, not rightness.”).  As a result, a reviewing court must “defer to the
agency’s fact-finding and drawing of inferences if they are supported by the record.”  Motor
20
Vehicle Admin. v. Shea, 415 Md. 1, 14, 997 A.2d 768, 775-76 (2010), quoting Motor Vehicle
Admin. v. Delawter, 403 Md. 243, 256-57, 941 A.2d 1067, 1076 (2008).  Moreover, a
reviewing court “must review the agency’s decision in the light most favorable to it; . . . the
agency’s decision is prima facie correct and presumed valid.”  Noland, 386 Md. at 571, 873
A.2d at 1154, quoting CBS v. Comptroller, 319 Md. 687, 698, 575 A.2d 324, 329 (1990). 
When we review the decision of an administrative agency, we look “through the circuit
court’s . . . decision[], although applying the same standard of review, and evaluate[] the
decision of the agency.”  Shea, 415 Md. at 15, 997 A.2d at 776, quoting People’s Counsel
for Baltimore County v. Loyola College in Md., 406 Md. 54, 66, 956 A.2d 166, 173 (2008).
In addressing the first question raised by Milliman, it appears that we must confront
a twofold issue, the first being whether there was substantial evidence supporting the Board’s
finding of underfunding, and second, whether the damages emanating from the underfunding
were caused by errors in Milliman’s actuarial recommendations.  
In our initial review, we consider the record as a whole to determine whether the
Board’s findings are supported by substantial evidence.  Najafi v. Motor Vehicle
Administration, 418 Md. 164, 173, 12 A.3d 1255, 1261 (2011); Critical Area Commission
v. Moreland, 418 Md. 111, 122-23, 12 A.3d 1223, 1230 (2011).  In addition to numerous
exhibits supporting its underfunding contention, the System also called various individuals
including  Major Morris Krome, an elected member of the Board of Trustees representing
the Maryland State Police Retirement System, who testified as follows:
21
[Counsel]: Can you tell the members of the Board whether or
not the Milliman actuaries told the Board that liabilities had to
be increased because of the error?
[Major Krome]: They did.
[Counsel]: And looking at the chart on page 2, can you tell the
Board by how much did liabilities increase as a result of this
issue?
[Major Krome]: I believe the figure is $87.2 million.
[Counsel]: And that’s for the State Police?
[Major Krome]: Yes. 
[Counsel]: And for the Judges’?
[Major Krome]: $24.8.
[Counsel]: And for the Law Enforcement Officers’ System?
[Major Krome]: S16.1 million.
[Counsel]: And the total amount they increased liabilities as a
result of this error?
[Major Krome]: $131.7 million.
In addition, Brent Mowery, an actuary versed in pension matters employed by the Hay
Group, testified that Milliman’s errors caused each of the affected systems to be underfunded
pursuant to the statutory funding goals, as follows:
[Counsel]: My question is how does knowing what the funding
goals are play into the valuation process? Again, if simply, you
can just explain that to the Board.
[Mr. Mowery]: The actuary in developing the funding
requirement for the upcoming year must take the funding goals,
in this case statutorily established, and prepare a result which is
consistent with those goals.
[Counsel]: So, for example, there was testimony earlier from
Treasurer Kopp that in 1982 the statutory funding goals for the
systems in the Maryland State System was to be fully funded by
the year 2020.  In your mind, is that a funding goal?
* * * 
[Mr. Mowery]: What we learned early on from reading the 1982
evaluation results was that in 1980 it was established that there
would be a goal of reaching full funding over a 40 year period
22
with respect to the unfunded accrued liability that existed in
1980 which, in essence, does take it to 2020, and we did
understand that was [the] statute.
[Counsel]: And my follow-up question then is how would a
reasonable professional actuary doing the valuation in 1982
have to factor that funding goal into the valuation process?
[Mr. Mowery]: If came in the form of Milliman recognizing that
with two years down and 38 to go, the remaining amortization
period for the unfunded accrued liability was 38 years, and they
calculated valuation results on that basis. 
* * * 
[Counsel]: And in your opinion, would payment by Milliman of
the approximately $73 million that you calculated place the
systems in the positions they would have been in 2005 absent
Milliman’s mistake in this case?
[Mr. Mowery]: Yes.  If this number, approximately $73 were
deposited by Milliman as of June 30, 2005, my belief would be
that the System was made whole or would have recovered the
loss associated with the Milliman errors.
[Counsel]: Can you explain conceptually why the $73 million
would have been sufficient to amortize as of 2004, 2005 $128
million in additional liabilities?
[Mr. Mowery]: Yes.  That has to do with the fact that
Milliman’s measurement of the error in October 2004 was
measuring a liability that had not up until then been accounted
for.  The fact is that that liability had it have been recognized
from the start back in 1982 would have been partially funded
through these annual amortization of unfunded liability
payments.  And what has occurred by the point in time of
6/30/05 is part of the $128 million liability has been funded. 
Part of it through the contributions and part of it through, you
know, net favorable investment returns over that period. 
[Counsel]: Is, is the size of the amount of damages here, the $73
million, a result of the nature of the mistake or of the time it was
allowed to continue?
[Mr. Mowery]: It’s both.  It’s a combination of the two.  And
we, by virtue of observing that the average return on investment
over that 22-year period was as high as 11 percent, whereas the
actuarial investment return assumption over those years was
23
below that, well below that, there has been factored in here an
influence that actually raises the level of shortfall or loss
suffered by the systems.  
[Counsel]: If the mistake had been caught any time prior to
2004, would the financial consequences to the systems have
been significantly different?
[Mr. Mowery]: Yes.  And it’s kind of proportionate.  The earlier
it might have been caught and corrected, the lower the
cumulative impact.  So, yes, it’s true the number would not be
nearly this high if the error had been applicable over a shorter
period of time and had been corrected earlier.
Finally, Dr. Ann Melissa Moye, a member of the System’s Board of Trustees in 2004,
testified that the three affected retirement systems were significantly underfunded at levels
ranging from 60 percent to 84 percent, as follows:
[Counsel]: Dr. Moye, you’ve said that but for Milliman’s error
in this case, the System would have collected additional
contributions from ‘84 through 2005.  Is that right?
[Dr. Moye]: Yes.
[Counsel]: And what was the amount?
* * * 
[Dr. Moye]: Right.  It would be $34 million.
* * * 
[Counsel]: And with regard to the systems at issue in this case,
do you have a knowledge of their funded status?
[Dr. Moye]: I do although not at, you know, as of after the
market drop, they would be components of that broad range I
gave you of between 60 percent and 70 percent.  As of the last
actuarial valuation that we received, June 30th of last year –
well, the State Police, for example, is at 84 percent having
dropped from about 88 percent.  LEOPS, the Law Enforcement
Officers is less than that, it’s in the 60s.  And the Judges is
around 74, I think it is.
Milliman asserts, relying on the testimony of Dr. Kim Nicholl, an actuary employed
24
by Price, Waterhouse, Coopers, that the “System was not damaged because the coding issue
resulted in it having made slightly fewer contributions in the past, because Milliman’s
funding recommendations over its tenure as actuary led the State to make more contributions
than were necessary to the System.”  Dr. Nicholl testified that Milliman’s recommended
contribution rates fell within “the range of reasonableness.”
[Dr. Nicholl]: What this graph shows is the contribution rate for
the State Police from 1982 through 2004, and there’s two lines. 
It’s hard to see up on the wall, but there’s a purple line and an
orange line, or a blue line and an orange line.  And the blue line
is the contribution rate that Milliman recommended to the Board
for the State Police.  And the orange line is what the
contribution rate would’ve been with the liability for the retirees
added on.  And it’s my opinion that these lines are so close
together that, really, they’re equivalent as far as actuarial
reasonableness is concerned, that the numbers are so close
together that you can’t say one is right and the other is wrong.
[Board Member]: And you’re referring to the comparison
between the actual – the actual funding recommendation that
was made by Milliman during that time, and then Mr. Mowery’s
corrected version?
[Dr. Nicholl]: That’s right.  My opinion is that the two are – if
you look at these two lines, they are very close.  In fact, you
know, the orange line just sits on top of the blue line.  It’s not
even – it just – they’re so close together that I have to say these
are equivalent, and both of them fall in the range of
reasonableness.  
* * * 
[Counsel]: And again, if you could just briefly describe this
chart and the information that’s conveyed on it.  
[Dr. Nicholl]: This is a chart very similar to the police, State
Police chart.  It shows the contribution rate from 1984 through
2004 for the Judge’s plan.  And again, the blue line is the total
contribution rate that Milliman’s valuation produced, and the
orange line is what that rate would’ve been had the coding error
25
not been – had the coding issue been included in the
contribution rate.  And, you know, similar to the police, you can
see that the two lines are right next to each other.  In my
opinion, they are both within the range of reasonableness.  I
would say that the blue line falls clearly within a range of
reasonableness, and that the plan has – you know, the
contribution rate, while it hasn’t declined like we sae the police
plan decline, it has gone down a little bit over the years.  
* * * 
[Counsel]: And this is a similar chart for LEOPS?
[Dr. Nicholl]: Yes. 
The Board, however, credited the testimony and evidence presented by Major Krome,
Mr. Mowery, and Dr. Moye rather than that of Dr. Nicholl regarding whether Milliman erred
or not.  Clearly, there was substantial evidence upon which the Board relied to support its
finding that the System had suffered losses totaling $73 million and that the affected systems
were thereby underfunded as a result of Milliman’s coding errors.
To address the second question, namely, how to measure damages caused by errors
in actuarial recommendations related to pensions systems, we lack statutory guidance as well
as precedent.  As a result, we turn to analogous decisions from our sister states to seek
assistance.  
In Dardaganis v. Grace Capital Inc., 889 F.2d 1237 (2d Cir. 1989), the Trustees of
the Retirement Fund of the Fur Manufacturing Industry entered into an agreement with Grace
Capital, Inc., in which Grace became investment manager of the assets of the retirement fund
and promised to “manage the [Fund’s] Account in strict conformity with the investment
guidelines promulgated by the Trustees.”  Id. at 1239.  Pursuant to the investment guidelines,
26
Grace was prohibited from investing more than fifty percent of fund assets in common
stocks.  During an eight month period, however, Grace invested more than fifty percent of
fund assets in common stock, exceeding the fifty percent ceiling each month by an average
of fifteen percent.  The Trustees refused to increase the ceiling above fifty percent, and Grace
was fired when the common stock holdings increased to approximately eighty percent of the
portfolio.
Thereafter, the Trustees brought suit, alleging that Grace had breached a fiduciary
duty embodied in 29 U.S.C. § 1104(a)(1)(D),  by failing to adhere to the common stock
7
ceiling.  The federal district court granted the Trustees’ motion for partial summary judgment
on the issue of liability, holding that Section 1104’s requirement that fiduciaries abide by the
plan documents together with the agreement’s provision that Grace manage the fund “in strict
conformity with the investment guidelines,” required the court to conclude, as a matter of
law, that “[a]ny violation of the terms of [the] [a]greement constitute[d] a breach of Grace
Capital’s fiduciary duty under § 1104(a)(1)(D) and create[d] liability to the Fund.”
Dardaganis, 889 F.2d at 1239.  The district court awarded damages by comparing what the
plan actually earned with what it would have earned had Grace invested only fifty percent
The federal statute, known as ERISA, was enacted by Congress to accomplish
7
two broad goals, namely “safeguarding the interests of [employee benefit] plan participants
and encouraging employers to offer such plans.”  Eid v. Duke, 373 Md. 2, 11, 816 A.2d 844,
849-50 (2003). ERISA sought to protect the interests of participants “by providing for
appropriate remedies, sanctions, and ready access to Federal courts.” Id., 816 A.2d at 850,
quoting 29 U.S.C. § 1001(b).  ERISA is not implicated in the present controversy.
27
of the fund’s account in equities.
On appeal, Grace asserted that “even if [it] breached a duty, there were no ‘losses’ to
the plan, because the sum of the Fund’s assets and the cash withdrawn to meet Fund
obligations increased during their tenure.” Dardaganis, 889 F.2d at 1243.  The Second
Circuit Court of Appeals affirmed the trial court, reasoning that the Fund has suffered losses
as a result of Grace’s breach, and any award of damages should take into account the
financial position the beneficiaries would have occupied, but for the breach:
[A]n “appropriate remedy in cases of breach of fiduciary duty is
the restoration of the trust beneficiaries to the position they
would have occupied but for the breach of trust.” [Donovan v.
Bierwirth,] 754 F.2d [1049, 1056 (2d Cir. 1985)].  If, but for the
breach, the [f]und would have earned even more than it actually
earned, there is a “loss” for which the breaching fiduciary is
liable. 
Id. at 1243.  In Dardaganis, therefore, an investment manager was required to compensate
a fund for losses stemming from a breach of the standard of care, no matter whether the
fund’s assets grew as a whole, to place the fund in the position it would have been in but for
the breach.
We also find helpful to our analysis an unpublished opinion of the California
intermediate appellate court, Board of Trustees v. Mercer, 2003 Cal. App. Unpub. LEXIS
6236 (Cal. Ct. App. 2003), in which the Board of Trustees for the San Luis Obispo County
Pension Trust as well as the County of San Luis Obispo filed a claim against their former
actuary, Mercer, for professional negligence.  In the case, presenting factual circumstances
28
remarkably similar to the present case, the trust paid a defined benefit and was funded by
contributions from the county and its employees and income from the investment of trust
assets.  Mercer was the trust actuary from 1980 through 1996, when the actuary discovered
errors in the computer program it used in preparing actuarial valuations for the trust,
including an assumption that plan participants would have no surviving spouses.  As a result,
Mercer failed to account for the payment of survivors’ benefits, such that “the trust’s future
liabilities were underestimated and its assets were overestimated.” Id. at *3.  
At trial, Mercer admitted breaching the actuarial standard of care, but disputed
liability, because “in spite of its errors, the trust was fully funded” and therefore, “suffered
no damages.”  Id. at *6-7.  The trial judge determined that the trust suffered a loss of
investment income on the nearly $11 million the county under-contributed to the fund. The
appellate court affirmed, rejecting Mercer’s contention that the award of lost interest would
amount to “an impermissible windfall.” Id. at *12.  Instead, the court recognized that
although the “county may derive an incidental benefit from Mercer’s payment of damages
to the trust, as will county employees and all taxpayers living within the county,” awarding
damages for lost investment income would place the county in the position it would have
been in had Mercer properly valued the pension’s assets and liabilities.  Mercer suggests that
whether a pension fund is fully funded is immaterial in calculating damages, when an actuary
29
has miscalculated pension obligations.8
In the present case, Milliman breached its contracts with the System by
misinterpreting the “00” code over a period of twenty-two years, thereby causing the System
to inadequately plan for the costs of retirement benefits to surviving spouses of judges and
police officers.   Milliman attempts to diminish its culpability for the errors because the
System has met its funding goals, as in Dardaganis and Mercer; the reality is, however, that
but for Milliman’s miscalculations, the three affected systems would have been more robust. 
We agree with the Board that to accept Milliman’s argument would enable a highly trained,
skilled professional to escape liability on the basis of fortuitous economic changes and better
than anticipated investment returns, rather than suffer the consequences of the breach of its
standard of care.9
Milliman asserts that Board of Trustees v. Mercer, 2003 Cal. App. Unpub.
8
LEXIS 6236 (Cal. Ct. App. 2003), demonstrates that the System is entitled only to damages
including lost investment earnings, rather than lost contributions.  In the case, the trial court
refused to award damages to the County for contributions that the County did not make to
the pension system, stating that the County “had use of the money.” Id. at *6.  On appeal, the
County did not challenge the trial judge’s refusal to award lost contributions and, therefore,
that issue was not before the intermediate appellate court.
Milliman refers us to In re Simon Fraser University Administration/Union
9
Pension Plan, No. C951466, 1997 B.C.T.C. LEXIS 5309 (B.C.S.C. July 8, 1997), in which
a Canadian court determined that an actuary was not liable to a university retirement system
for misinterpreting employee salary data, because the actuary’s estimation of employee
salaries was “generally accepted.”  Id. at 54-55.  Simon Fraser is inapposite, because, in the
present case, the Board determined and we agree that Milliman breached the actuarial
standard of care by miscalculating spousal benefits over a period of more than twenty years
for the three affected systems.   The other cases upon which Milliman relies are also
inapposite, because of Milliman’s breach of the actuarial standard of care.  
30
In this regard, the Board relied upon four standards applicable to actuaries during the
contract term, including the historical Guides to Professional Conduct adopted by the
American Academy of Actuaries, which provides that 
[t]he actuary will exercise his best judgment to ensure that any
calculations or recommendations made by him or under his
direction are based on sufficient and reliable data[,]
and also Actuarial Standard of Practice (ASOP) No. 4, pertaining to recommended practices
for data analysis, which states that
[a]ll provisions of the plan adopted and effective on or before
the start of the plan year should generally be taken into account
in measuring pension obligations.
ASOP No. 4 further provides that the actuary should verify the reasonableness of plan data:
The actuary will generally rely on the plan administrator, plan
sponsor or other qualified third party for asset and participant
information.  While not responsible for auditing the information,
the actuary should verify its reasonableness both directly and
against other available information, such as prior years’ data and
reported benefit payments.  If the actuary is not satisfied as to
the reasonableness of the information, further inquiry should be
made until the actuary is so satisfied.  
Finally, the Board relied upon ASOP No. 23, pertaining to data quality:
In many situations, the actuary is provided with other
information relevant to the appropriate use of data such as
contract provisions, plan documents and reinsurance treaties. 
The validity and comprehensiveness [as contrasted to clarity] of
such information are the responsibility of those who supply such
information.  The actuary may rely on such information supplied
by another, unless it is or becomes apparent to the actuary
during the time of the assignment that the information contains
material errors or is otherwise unreliable. . . . A review of data
31
may not always reveal existing defects.  Nevertheless, whether
the actuary prepared the data or received the data from others,
the actuary should review the data for reasonableness and
consistency . . . .
We agree with the Board that Milliman breached the articulated standards of care by failing
to verify the reasonableness of the information provided regarding the code through inquiry
of the System, as early as 1982.  
Milliman also advances two arguments regarding the relationship of the System and
the State, in order to limit its exposure in the present case.  Milliman initially contends that
the System and the State are the same entity, such that any award of damages “must reflect
that the State always retained the use and benefit of contributions not made to the System.” 
The State, however, was not a party before us, nor before the Board, which noted the absence
of the State as a party.  In an analogous scenario, in Hashmi v. Bennett, 416 Md. 707, 7 A.3d
1059 (2010), we precluded a physician who had been adjudicated as negligent from seeking
contribution from three alleged “joint tortfeasors” who were not joined as parties in the
original action, because the latter did not have an opportunity to participate in the primary
case.  In the present case, we similarly cannot countenance Milliman’s assertion of “offset”
against the State, for the retention of “the use and benefit of contributions not made to the
System,” because the State was not joined as a party in the proceeding before the Board.  
10
In a related argument, Milliman asserts, relying upon State v. Hogg, 311 Md.
10
446, 467, 535 A.2d 923, 933 (1988), overruled on other grounds by Dawkins v. Baltimore
City Police Department, 376 Md. 53, 827 A.2d 115 (2003), that state agencies, such as the
(continued...)
32
Alternatively, Milliman argues that if the State and the System are regarded as distinct 
bodies, then the System has failed to demonstrate damages, because the State is obligated to
“pay the accrued unfunded liability relating to the coding issue over a period of years.” 
Essentially, Milliman asserts that taxpayers are obligated to fund the retirement systems, so
that despite the actuary’s repeated errors, outstanding pension liabilities will be funded.
(...continued)
10
System “should be treated as one entity legally with their parent State.”  Hogg is inapposite,
because the trial judge in that case determined that the State was the “real party in interest”
in a claim asserted by the Maryland Deposit Insurance Fund Corporation, an agency specially
created by the General Assembly to limit the State’s exposure in response to the savings and
loan crisis.
Milliman also refers us to an unreported opinion, Los Angeles County Employees
Retirement Association v. Tower, Perrin, Forster & Crosby, 2002 U.S. Dist. LEXIS 27916
(C.D. Cal. 2002), as support for the proposition that the System and the State are “the same
for the purposes of offsetting damages.”  In that case, the Los Angeles County Employees
Retirement Association, alleged that Tower, Perrin, Forster & Crosby committed repeated
actuarial errors over the course of the two decades as the association’s actuary and claimed
that as a result, the association received approximately $800 million less in contributions that
it was entitled to collect, and that it cannot now recover from the County.  The actuary
asserted that any recovery by the association must be reduced by the amount retained by the
County, because “[the association] and the County are effectively a ‘closed system.’” Id. at
*3.  Tower, Perrin, Forster & Crosby is distinguishable, however, because the court in that
case applied the “unitary creditor” doctrine, applicable in the federal arena, to which we have
not ascribed.  Id. at *31.
The dissent, however, asserts that Maryland has embraced the unitary creditor
doctrine, relying on Lomax v. Comptroller of Treasury, 323 Md. 419, 420, 593 A.2d 1099,
1100 (1991).  The case does not, though, embrace a unitary creditor doctrine, as the federal
courts have done, but in the language cited, merely recognizes that the Retirement System
and the Comptroller are agencies under the State’s control, and that the statute at issue
permitted garnishment of state retirement funds by the Comptroller.  Where the unitary
creditor doctrine has been embraced, it has been in explicit terms: “[T]he United States is
treated as a unitary creditor, and agencies of the United States government . . . may set off
debts owed by one agency against claims that another agency has against a single debtor.”
Turner v. SBA, 84 F.3d 1294, 1296 (10th Cir. 1996) (en banc).  
33
We agree with the Board’s assessment that the System and the State are certainly
interrelated, because, inter alia, the State serves as guarantor of System pension liabilities,
as follows:
(a) Obligations of the State. – The following are obligations of
the State:
(1) the payment of all allowances and other benefits payable
under this Division II; 
(2) the creation and maintenance of reserves in the accumulation
funds of the several systems;
(3) the crediting of regular interest to the annuity savings funds
of the several systems; and 
(4) the payment of the expenses for administration and operation
of the several systems.
Section 21-302 of the State Personnel and Pensions Article.  As further emphasized by the
Board, however, funds held by the System are wholly distinct from other State funds. 
Because we have never had occasion to consider the identity of the System and the State, we
again find succor in decisions from other jurisdictions which have faced analogous scenarios. 
In Day v. New Hampshire Retirement System, 635 A.2d 493 (N.H. 1993), Day was
diagnosed as having “work-related tendinitis in both wrists” while working as a toll attendant
for the Department of Transportation.  Although Day received workers’ compensation
benefits, she was denied “accidental disability retirement benefits” from the retirement
system.  Id. at 494.  Day petitioned for a hearing and the retirement board again denied her
benefits, reasoning that she had failed to demonstrate that her injury was work-related and
that she was permanently incapacitated from performing her duties.  When Day sought
judicial review in the trial court, the trial judge determined that the retirement system and the
34
department of labor were in “privity,” so that the retirement system was collaterally estopped
from relitigating the issues that had already been determined in the workers’ compensation
proceeding.  Id. at 494-95.
On appeal, the retirement system asserted that it was not in privity with Day’s
employer, the Department of Transportation, and the New Hampshire Supreme Court agreed,
reversing the judgment of the trial court.  In so doing, the court held that “because of the
distinct identity, constituency and interests of the retirement system, it is not in privity with
executive agencies of the State, including the [D]epartment of [T]ransportation,” noting
salient features of the retirement system, as follows:
First, the statute makes clear that the retirement system is a
qualified pension trust within the meaning of the United States
Internal Revenue Code, and as such holds all funds in trust for
its members.  The retirement system is administered by a
thirteen-member board, including two teachers, two permanent
police officers, two permanent firefighters, and two employees. 
Membership is not limited to employees of the State, but also
may include employees of counties, cities, towns, school
districts, school administrative units, and other political
subdivisions.  The retirement system is a contributory one to
which both employers and employees are required to contribute.
The contribution rate for employees is currently fixed by statute,
but the employer contribution rate is periodically adjusted by the
board in response to biennial actuary reports on the assets and
liabilities of the fund.  The state treasurer has historically been
the custodian of retirement system funds, but the board retains
the power to appoint whomever it chooses to hold that position. 
Even though the state treasurer may serve as custodian, the
funds are not part of the State’s general treasury and may only
be used for providing retirement benefits.  The board has the
power to invest the funds in accordance with the limitations
placed upon any domestic life insurance company, and may
35
charge the fund for the advice of investment advisors and
actuaries whom it is empowered to employ.  The board may
always engage legal counsel for investment, federal, and tax
matters and, with the approval of the attorney general, may
engage counsel for all other matters.
Day, 635 A.2d at 496-97 (citations omitted).  The court further emphasized that because the
retirement system is a contributory one, the impact of disbursements may be felt by all
participating employers and employees, so that even if the State’s interests were well
represented in the workers’ compensation proceedings, “the same cannot be said of the
interests of the members of the retirement system, nor of the many contributing employers
other than the State.” Id. at 497.
Similarly in Traub v. Board of Retirement of the Los Angeles County Employees
Retirement Association, 670 P.2d 335 (Cal. 1983), a probation officer employed by Los
Angeles County sought a service-connected disability pension, claiming psychiatric
disability.  The Retirement Board determined that the probation officer was disabled, but
granted only the lesser retirement allowance for “disability that is not service-connected,”
and a referee affirmed the Board’s decision.  Id. at 337.  Thereafter, the probation officer
sought judicial review in the trial court, which also affirmed the Board’s decision, reasoning
that the officer’s “psychiatric condition” arose out of his wrongful termination, “not from the
job activities.”  Id.  On appeal, the probation officer argued that “the required connection
between disability and employment was conclusively established, under res judicata
principles, by a decision of the Workers’ Compensation Appeals Board,” which awarded him
36
benefits for “injury to his emotional state.”  Id.  The Supreme Court of California rejected
that argument, because “the requisite privity between the county, against which the award
was made, and the county Retirement Board, appear[ed] to be lacking.” Id. at 338.  The court
reasoned that a Retirement Board does not act as an agent for the county, but as administrator
of the county retirement system, “an independent entity established pursuant to [county
law].”  Id.  The court also emphasized that funding for the system comes from both
governmental employers and from employees, so that any adjudication of a claim for benefits
“may have economic impact upon the membership of the association,” as well as upon the
county. Id.
As in Day and Traub, the Board in the present case recognized that the System and
the State are distinct entities, so that the State’s General Fund is not just a pot in which the
System may dip:
MSRPS funds are unique in several ways.  All of the State’s
retirement and pension system funds are assets held in trust as
governmental plans under the Internal Revenue Code (IRC) 26
U.S.C. §§ 401(a) and 414(d), which confer tax benefits under
IRC §§ 414(h)(2) and 501(a) to such qualifying funds held not
on behalf of the State but instead, on behalf of the participating
members and their beneficiaries.  MSRPS funds are held not for
public use as other special funds are held to be used to build or
acquire such public amenities as roads or newly purchased park
property, for example.  MSRPS holds its funds strictly in a
fiduciary capacity to be paid to private individuals for use as
they please, upon the occurrence of a certain future condition,
namely employee retirement, presumably as set forth in current
law and employment contract provisions establishing binding
contractual obligations.  Legislative encumbrance of vested
retirement benefits or those promised to become vested at a
37
future time certain, could well be subject to effective court
challenge and reversed as retroactive impairment of contract. 
This Board does not reach such a conclusion today, but only
notes that assets held by MSRPS are not assets of the State in
the ordinary meaning of State assets.  Instead, they are uniquely
held by MSRPS in fiduciary trust on behalf of others.  
Thus, we agree with the Board that the State and the System are distinct entities for the
purpose of calculating damages as both lost contributions and lost interest on those
contributions due the System as a result of Milliman’s contractual breaches.  
11
Finally, Milliman argues that the System was contributorily negligent in providing a
“confusing” definition of the “00” code.  Initially, Milliman asserts that the Board’s finding 
that the System accurately reflected “the meaning of its codes as a part of its data dictionary” 
was not supported by substantial evidence.  The System presented testimony by Brent
Mowery, a pension actuary employed by the Hay Group, regarding Milliman’s obligation to
carefully review the System’s data and correct any misunderstandings:
[Mr. Mowery]: I’d like to share something that I think is
relevant from my early days as an actuarial student back in the
time frame of 1975 to 1982.  
I remember guidance from the senior actuaries that I
worked for saying we can’t let the client fool us with respect to
In a related argument, Milliman refers us to Amwest Savings Ass’n v. Statewide
11
Capital, Inc., 144 F.3d 885 (5th Cir. 1998) and United States v. City of Twin Falls, Idaho,
806 F.2d 862 (9th Cir. 1986), as support for the proposition that an award of damages to the
System would amount to a windfall, because “[t]he State has, and will continue to make, all
payments to the System” to compensate for the coding errors.  This argument is based upon
an assumption that the State is presently obligated to compensate the affected systems for
losses sustained as a result of Milliman’s actuarial errors, which we will not consider because
the State is not a party before us. 
38
their data.  We need to be able to detect if there’s a problem with
their data, but we don’t have time to go through and read every
record for the 10,000 lives that they’ve submitted.  Your
challenge, Mowery, is to figure out if this data makes sense. 
Can we buy it and run with it ‘cause we’re going to waste a
whole lot of time if there’s a problem.
So I just share that because, you know, reliance on the
client to give clean data – and it was a struggle, a balancing act,
because clients wanted inexpensive valuations.  They wanted
you to take their data and run with it.  No questions asked.  That
was the way to get the cheapest valuation.  That’s a dangerous
thing for an actuary to do.
* * * 
[Counsel]: You were aware that Milliman in this appeal says
that it failed to value these liabilities because it misunderstood
the Agency’s coding systems.  Are you aware of that?
[Mr. Mowery]: Yes, I am.  
[Counsel]: And in your opinion, does any misunderstanding on
Milliman’s part of the Agency’s coding system excuse it’s
failure to meet this professional responsibility?
[Mr. Mowery]: No, it does not.
[Counsel]: And why is that?
[Mr. Mowery]: That’s an aspect of an actuarial valuation that a
pension actuary needs to get right, cannot be misled.  It’s too
important.  And in my experience and what I believe reasonable
actuaries in 1982 would say is by all means, you’ve got to
properly capture the normal form of payment applicable to a
pension system in performing your valuation, and you can’t be
misled.  You’ve got to overcome any kind of temptations to be
taken down the wrong path and get it right.
[Counsel]: If the actuary is confused about data relating to the
normal form of payment, in your view, what would be expected
of a reasonable professional actuary in that circumstance?
[Mr. Mowery]: To seek the truth and make sure you’re confident
that you found it.  And, you know, actuaries have alternatives as
to how they get to the facts.  Probably the most reliable way is
to go to the legal plan document or legal section of the Code that
would spell this out.  Seek something that is, you know, in
writing and can’t be misinterpreted.  
39
Alternative ways to seek this information would be talk
to the client, try to get clarification directly from your client.  An
alternative in this instance would have been for the Milliman
actuary to talk with the [previous actuary] who handled the
valuation in the preceding year and see what the [previous
actuary] has to say.  But there are multiple ways to get to the
determination of the normal form of payment that applies and a
way has to be found to get to the correct answer.  
Milliman also offered evidence regarding its allegation that the System was contributorily
negligent, in the form of testimony by Dr. Thomas Delutis, a consultant in the area of
“business process improvement” and “computing solutions,” as follows:
[Counsel]: Have you concluded to a reasonable degree of
professional certainty – have you reached a conclusion to a
reasonable degree of professional certainty as to whether the
Agency exercised reasonable care in documenting and
communicating the meaning of the 00 code?
[Dr. Delutis]: Yes. 
[Counsel]: And what is your opinion?
[Dr. Delutis]: That they did not.
* * * 
[Board Member]: Dr. Delutis, what should they have done?
[Dr. Delutis]: All that this says – if you provide this information,
00 through 05, to a computer programer or to anybody else, it is
00 through 05.  There is nothing that says what 00, how it ties
back to the election that a retiree has.  It’s just 00 through 05. 
That’s all it says.  Therefore, something else, especially in
programming, something else had to be known and provided to
the programmer to take that code, and to do something with it. 
Now, if you look at what’s done here, says ah, 00 has
different meanings based on which system you’re in.  So it
means one thing for one system; something else for another
system.  So not only did you have to know the code value, the
value that was in there, but also the system that it was being
applied to.  And oh, by the way, you also have to know, for
40
certain systems, if he’s married or not, or she is married or not. 
So there was another set of criteria.  
All that needed to be explained in some document
someplace for a programmer to take that in there and,
essentially, use it to calculate whatever benefit payment stream
was being calculated.  So somehow on the master tape, there
was a program someplace that had, in addition to those values,
0006, some other additional information that it used. 
Remember, the program is like a beautiful child.  It does exactly
what you tell it to do.  So somebody had to tell how to use and
interpret those data values in order to come up with a payment
stream.  That was not sufficient.  That documentation didn’t do
the job.  
The Board credited the testimony of Mr. Mowery, an actuary versed in the pension arena,
rather than that of Dr. Delutis, who was not an actuary, regarding whether the data provided
by the System was sufficient.  Clearly there was substantial evidence upon which the Board
relied to support its finding that the System was not contributorily negligent in providing the
code to Milliman, given Milliman’s professional obligation to review and interpret the data.
In asserting that the System was contributorily negligent as a matter of law, Milliman
principally relies upon Wegad v. Howard Street Jewelers, Inc., 326 Md. 409, 605 A.2d 123
(1992), in which the jewelry store was seeking damages against an accountant for failing to
detect the embezzlement of funds by a store employee.  The jewelry store sought a specific
jury instruction indicating that a client “can rely on the accountant’s knowledge and skill”
and that “[i]t is not contributory negligence for a client to follow an accountant’s instructions,
or rely on his advice.” Id. at 412, 605 A.2d at 125.  We disagreed and reasoned that the
jewelry store owners were uniquely situated to uncover the criminal actions of their
41
employee, such that the “jury could have found that the extent of the [owner’s] reliance on
[the accountant] was not reasonable.”  Id. at 422, 605 A.2d at 130. 
Wegad is wholly distinguishable, because unlike the jewelry store owners who were
uniquely situated to uncover their employee’s embezzling, Milliman, rather than the System,
was the entity that was in a better position to detect and correct the coding error.  The Board
found that Milliman should have detected the coding error when it compared its 1982
calculations with the previous year’s performed by another actuary and noted that “although
the number of State Police retirees increased from 288 to 339 or 341, their total retirement
liability decreased from $67 million to $65 million.”  Similarly, as the Board noted, Milliman
should have discovered the error when the actuary “performed its first valuation for DNR
police, a system established July 1, 1990, but instead, Milliman merely duplicated its earlier
coding error.” Unlike the jewelry store owners in Wegad, Milliman had a professional
obligation to interpret the data provided by the System.12
More apt to our analysis is Hill v. Wilson, 134 Md. App. 472, 760 A.2d 294 (2000),
In a similar vein, Milliman refers us to E.F. Hutton Mortgage v. Papas, 690
12
F. Supp. 1465 (D. Md. 1988), in which the federal district court determined that Hutton’s
claim against its accounting firm was barred by contributory negligence.  In that case, Hutton
purchased loans originated by First American Mortgage Company and sought to recoup
losses from its accounting firm, claiming that the accounting firm had failed to disclose that
First American’s “[s]ervicing records were in chaos.” Id. at 1474.  The court reasoned that
Hutton’s losses were not proximately caused by the accounting firm, because the mortgage
purchaser already knew that First American’s loan servicing operation was “severely
deficient.”  Id. at 1475. The present case is wholly distinguishable, because as the Board
opined, Milliman had numerous opportunities to detect and correct the coding error and also
had a professional obligation to  review and interpret the data provided by the System. 
42
in which our colleagues on the Court of Special Appeals considered whether a patient was
negligent in his claim against a physician, for the physician’s alleged failure to properly
diagnose and treat a serious infection.  The physician contended that the patient was
contributory negligent, because the patient was directed to return for treatment if his
condition worsened and had failed to do so.  The intermediate appellate court held that the
trial judge did not err in denying the physician’s motion for summary judgment, because the
physician failed to demonstrate “some prominent and decisive act [by the patient] which
directly contributed to the accident and which was of such a character as to leave no room
for difference of opinion thereon by reasonable minds.”  Id. at 492, 760 A.2d at 305, quoting
Campbell v. Montgomery County Bd. of Educ., 73 Md. App. 54, 64, 533 A.2d 9, 14 (1987). 
In the present case, although the Board noted that the System may have employed
greater clarity in defining the various codes, the Board determined that the System provided
ample explanation of the “00” code involving the three affected retirement systems when it
provided to Milliman “its written Annual Valuation Record,” as well as “employee brochures
describing retirement payment provisions.”  To the extent that the coding may have been
confusing, Milliman bore an express duty, as the Board opined, to solicit “further clarifying
information until it accurately understood the information provided to it by the client.” 
Our final task is to consider the System’s certiorari question, namely whether the
Circuit Court erred in reducing the Board’s damage award for lost contributions in the
amount of $34,200,000.  In an oral opinion, the Circuit Court determined that the System
43
failed to demonstrate that the $34,200,000 in lost contributions “no longer exist[s]” so that
the Legislature could not fund the losses sustained by the System as a result of Milliman’s
breach.  Because the State was not a party to the proceeding before the Board, or for that
matter, before the court, whether any damage award by Milliman should be offset by an
amount retained by the State was not properly before the Circuit Court.   See Hashmi, 416
Md. at 707, 7 A.3d at 1059.  Therefore, the Circuit Court erred in reducing the Board’s award
of damages to the System by $34,200,000 in lost contributions.  As a result, we shall vacate
the judgment of the Circuit Court and direct that the Board’s decision be affirmed in its
entirety.
JUDGMENT OF THE CIRCUIT COURT
FOR BALTIMORE CITY VACATED, AND
CASE REMANDED TO THAT COURT
WITH DIRECTIONS TO AFFIRM THE
DECISION OF THE STATE BOARD OF
CONTRACT APPEALS.  COSTS IN THIS
COURT AND IN THE CIRCUIT COURT
FOR BALTIMORE CITY TO BE PAID BY
APPELLANT.
44
IN THE COURT OF APPEALS
OF MARYLAND
No. 102
September Term, 2010
                                                                             
MILLIMAN, INC.
v.
MARYLAND STATE RETIREMENT AND
PENSION SYSTEM, et al.
                                                                             
 
Bell, C.J.,
Harrell
Battaglia
Greene
Murphy
Adkins
Barbera,
JJ.
                                                                             
Dissenting Opinion by Harrell, J.,
which Murphy and Adkins, JJ., join.
                                                                             
Filed: July 20, 2011
The Maryland Code requires the Maryland State Retirement and Pension System (“the
System”) to employ the services of an actuary to “give technical advice . . . on the operation
of the funds,” among other duties.  Maryland Code (1993, 2009 Repl. Vol., 2010 Supp.),
State Personnel and Pensions Article, § 21-125(a).   Pursuant to the statute, each year, the
1
State contributes to an “accumulation fund,” which the System stewards and uses to meet
obligations to employee-members.  See §§ 3-501, 21-302-308.  The State bases these
contributions on the actuary’s estimates.  
In the present case, the actuary hired by the System, Milliman, Inc. (“Milliman”),
committed a long-running mathematical error that caused a contribution shortfall of $34
million.  In addition to this shortfall, the System alleges (and the Board of Contract Appeals’s
and the Majority’s opinions agree) that the total damages should include an additional $39
million, representing the interest the System would have reaped through investment of the
contribution shortfall.  That total – $73 million – is not a proper or accurate calculation of
damages as a matter of law, as I see it.  Although I grant that the System is a “special”
appendage of State government, vested with a somewhat unique degree of independence, for
purposes of calculating damages here (if not more), there is no legally- or logically-sound
reason to treat the System and the State as separate entities.
Because the System and Milliman did not specify how damages should be calculated
in the instance of a breach of the contract, we should put the parties in the position they
 All code citations refer to the State Personnel and Pensions Article, unless otherwise
1
indicated.
would have been but for the breach.  To do so, we should not blind ourselves to the reality
that the State and the System are part of a single government and that, together, they did not
suffer a contributory loss, as the State continued to collect and enjoy the same amount of
revenue, irrespective of Milliman’s error.  The fact that the System was unable to invest the
$34 million simply leaves open the possibility of limited damages – the difference in the rate
of investment return attributable to the two governmental units.  According to Milliman, that
amounts to $24.7 million. 
I.
Before this Court, Milliman argues that any damages calculation should take into
account that the State and the System are one entity, even though the State, as such, was not
a named party to this litigation.  The facts of the present case indicate that the State did not
change its behavior, save for retaining the $34 million in other areas of the government and
not the System.  Stated another way, the State collected the same amount of revenue, but
simply used the money in other contexts, outside the retirement system.  Thus, Milliman
posits that there must be more limited damages than was awarded by the Board of Contract
Appeals.
A.  The State and the System’s Ineradicable Interconnectedness
To “determin[e] whether a statutorily-established entity is an agency[,]
instrumentality,” or mere appendage, “of the State for a particular purpose,” like the
calculation of damages, we have “repeatedly recognized that there is no single test . . . .”  A.S.
-2-
Abell Pub. Co. v. Mezzanote, 297 Md. 26, 35, 464 A.2d 1068, 1072 (1983).  Instead, “[a]ll
aspects of the interrelationship between the State and the statutorily-established entity must
be examined in order to determine its status.”  Id. (citations omitted); see e.g., A.S. Abell Pub.
Co., 397 Md. at 39, 464 at 1074 (“After examining all aspects of the interrelationship
between the State and [the Maryland Insurance Guaranty Association (“MIGA”)], including
the degree of control exercised by the State over MIGA’s operation, we are persuaded that
MIGA is an agency or instrumentality of the State [and, therefore,] within the scope of the
Public Information Act.”).2
Through Title 21 of the State Personnel and Pensions Article, the Legislature created
a “State Retirement and Pension System” to “provide benefits . . . for [State-employee]
participants in the several systems.”  § 21-101(b).  Although the Legislature created an
uncompensated Board of Trustees to run much of the System, it retained significant
managerial oversight and discretion.  MARYLAND STATE RETIREMENT AND PENSION SYSTEM,
C O M P R E H E N S I V E  
A N N U A L  
F I N A N C I A L  
R E P O R T  
2 4  
( 2 0 1 0 ) ,
 Engaging this analysis, this Court should not apply, as the Majority opinion does, a
2
deferential standard of review.  The Majority opinion concedes that the relevant question
here is “how to measure damages caused by errors in actuarial recommendations related to
pensions systems . . . .”  Majority slip op. at 26.  Stated another way, the issue is whether the
State and the System should be considered one entity for purposes of calculating damages. 
This is a question of law, deserving a de novo standard of review.  See L.A. County
Employees. Ret. Ass’n v. Towers, Perrin, Forster & Corsby, Inc., 2002 U.S. Dist. LEXIS
27916, at *31 (C.D. Cal. 2002) (“Whether government agencies should be deemed a single
entity for purposes of setoff is a question of law.” (citing United States v. Maxwell, 157 F.3d
1099, 1102 (7th Cir. 1998)).
-3-
http://www.sra.state.md.us/Agency/Downloads/CAFR/CAFR-2010.pdf (“The System is
fiscally dependent on the State by virtue of the legislative and executive controls exercised
with respect to its operations, policies, and administrative budget.”).  Indeed, under the
statute, the State is obliged to “pay[] . . . all allowances and other benefits”; to “creat[e] and
maint[ain] . . . reserves in the accumulation fund[]”; to “credit[] . . . regular interest to the
annuity savings fund[]”’ and to “pay[ all] . . . expenses for administration and operation of
the several systems.”  § 21-302(a)(1)-(4) (emphasis added).  To that end, the Governor and
the Legislature require the Board to submit an annual budget report, § 21-109, which they
consult discretionarily in their preparation of the State Budget.   Moreover, while the Board
3
is empowered to hire an actuary, like Milliman, the General Assembly reserved the power
to hire its own “Legislative Auditor” to “conduct an annual or biennial fiscal and compliance
audit of the [System’s] accounts and transactions . . . .”  § 21-127.  
The State’s paternal role with regard to the System does not end there.  The General
Assembly designated the State Treasurer, not the Board of Trustees, “[a]s the custodian of
 For fiscal year 2012, the State passed a $14.6 billion operating budget (which refers
3
to the General Fund as opposed to debt obligations), wherein it allocated $1.5 billion for the
pension system.  MARYLAND DEPARTMENT OF BUDGET AND MANAGEMENT, REFORMING
MARYLAND’S PENSION SYSTEM: A PATH 
TO SUSTAINABILITY 3 (2011),
http://www.governor.maryland.gov/documents/RetirementReform.pdf.  In the last decade,
with the retirement of 40,000 additional members (along with myriad other factors), the State
has increased its contribution amount by 178%.  See MARYLAND STATE RETIREMENT AND
PENSION SYSTEM, COMPREHENSIVE ANNUAL FINANCIAL REPORT 101 (2010),
http://www.sra.state.md.us/Agency/Downloads/CAFR/CAFR-2010.pdf; REFORMING
MARYLAND’S PENSION SYSTEM 4.  Nevertheless, the State faces currently $35 billion in
unfunded liabilities.  REFORMING MARYLAND’S PENSION SYSTEM 2.
-4-
. . . the accumulation, annuity savings, and expense funds of the several systems . . . and the
assets of the Board of Trustees.”  Payments from these funds must follow regulations
formulated by the Board, but approved ultimately by the State Treasurer.  § 21-124(a)(2). 
The Legislature also entrusted the State Treasurer with the job of physically “safeguard[ing]”
the System’s assets.  § 21-124(b).  The State discloses these assets in its own financial
statements.  See COMPREHENSIVE ANNUAL FINANCIAL REPORT at 24.
Such oversight and reservation of authority is understandable, given that the General
Assembly – rather than the Board of Trustees, employees, or any other group(s) – is
responsible for the welfare of the System.  The State pays into the System not only as an
“employer,” but also as the only guarantor of risk and loss.  Indeed, as a last resort, the statute
requires the State to “pay to the accumulation fund . . . at least an amount that when
combined with the amount in the accumulation fund . . . is sufficient to provide the
allowances and other benefits payable out of the fund . . . .”  § 21-302(c).  The System does
not have a separate power to raise funds, outside of investing profitability the State’s and
employees’ contributions.   § 21-108(c). 
This scheme reveals that the System is merely an extension of the State (i.e., part of
a single government), not simply because it was created by the Legislature, but because of
the close, ongoing, and managerial presence of the State in the activities of the System.  To
refer to the System at large is to refer to the State, at least for the purpose of calculating
damages.  Los Angeles County Employees Retirement Association v. Tower, Perrin, Forster
-5-
& Crosby, 2002 U.S. Dist. LEXIS 27916, at *50 (C.D. Ca. 2002) (“[W]hile the separateness
of [a retirement system] and [a c]ounty is recognized for a number of purposes, this
separateness is not absolute and does not pervade every aspect of the relationship.  For
certain functions [including the calculation of damages], [the retirement system] and the
[c]ounty should be considered the same entity.”).4
 Although I use the word “agency,” I do not mean to invoke the relationship between
4
a corporate parent and its legally-recognized subsidiary.  I agree with the U.S. District Court
for the Central District of California and the U.S. Bankruptcy Appellate Panel of the Ninth
Circuit that: 
“[T]he more appropriate analogy is that of separate departments
within a single corporation.  Just as a large corporation has
different departments – marketing, sales, accounting, personnel,
etc., – with individual budgets and separate interests, so does the
federal government.  In both situations, each separate
department must compete against the others for its share of the
overall budget. Such is not necessarily the case with corporate
subsidiaries, who are often expected to be self-sustaining and
whose fortunes are not necessarily tied to the parent’s
profitability.”  
In the instant case, the relationship between [a county retirement
system] and the [c]ounty [government] is more akin to that of
separate departments within a single corporation than to the
relationship between a parent-corporation and a wholly-owned
subsidiary.  [The retirement system] is not self-sustaining, and
[its] fortunes are indisputably tied to the [c]ounty’s
“profitability.”
See Towers, Perrin, Forster & Corsby, Inc., 2002 U.S. Dist. LEXIS 27916, at *31 (quoting
HAL, Inc. v. United States, 196 B.R. 159, 165 (B.A.P. 9th Cir. 1996)); HAL, Inc., 196 B.R.
at 163 (finding that the organization of federal agencies supported a finding of mutuality, in
part, because “all federal agencies draw from or contribute to a common pool of money, the
(continued...)
-6-
B.  The Extent of the System’s Damages
Any measure of damages resulting from a contractual breach must be based on the
facts at hand and the realities of the parties’ situations.  In the present case, Milliman
misstated the amount that the State should provide to the System under statutory contribution
formulae.  As a result, the State did not contribute an extra $34 million, spread out over
twenty-two years.   For purposes of context, those contributions would be $1.5 million per
5
year if spread out evenly.  In response to Milliman’s faulty underestimation, the State did not
seem to change accordingly its revenue-collection practices.  This is not surprising,
considering that the State, in the same timespan, contributed many billions of dollars – $1.3
billion in fiscal year 2010 alone.  Such a minuscule annual amount of “missing” contributions
did not affect the System’s target funding goal and, therefore, did not alter the State’s
behavior.  
 Although an appendage of the State, i.e., the System, did not possess for its
immediate use the $34 million, the State at large did.  The true impact of the calculation error
was that the State, and not the System, retained and invested (or applied) the $34 million
elsewhere.  Thus, proper damages would be the difference in the investment return only.  
The story of damages would be written differently, of course, if the error had caused
(...continued)
4
U.S. Treasury”).
 The System claims it would have invested the money so wisely as to reap another
5
$39 million.
-7-
the employee-members not to make $34 million worth of contributions.  In that instance, no
one would enjoy the use of the $34 million – that is to say, the State’s financial statements
would be missing $34 million.  That is not the case here.
When calculating damages flowing from a contractual breach (absent a contractual
agreement governing the calculation of damages in the event of breach), courts endeavor to
put the parties in the position that they would have been but for the breach.  St. Paul at Chase
Corp. v. Manufacturers Life Ins. Co., 262 Md. 192, 250, 278 A.2d 12, 40 (1971) (“The Court
should endeavor to place the injured person, so far as possible, by monetary award, in the
position he would have been if the contract had been properly performed.” (internal quotation
marks and citation omitted)).  As this Court stated:
The damages which a plaintiff is entitled to recover for a breach
of contract should be such as may fairly and reasonably be
considered as either arising naturally, i.e., according to the usual
course of things, from such breach of contract itself, or such as
may reasonably be supposed to have been in the contemplation
of both parties at the time they made the contract as the probable
result of a breach of it.
St. Paul at Chase Corp., 262 Md. at 240, 278 A.2d at 35 (internal quotation marks and
citation omitted).  To do so, we must judge not what the non-breaching party wants to
recover, but what he/she/it should recover in light of the facts at hand.  
In the present case, the parties did not establish in their contract how damages would
be calculated in the event of a breach.  As such, we must determine how to make the non-
breaching party whole, in light of what “may reasonably be supposed to have been in the
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contemplation of both parties at the time they made the contract . . . .”  Id.  Given that the
State, as a single government, was not deprived of the use of the $34 million, the proper
damages amount – i.e., the amount needed to fulfill the State’s expectations – is the
difference in the investment return.  Such a calculation has the added benefit of
approximating what the parties would have expected reasonably.  Milliman was being paid
$100,000 a year for its actuarial services and would not have expected reasonably to pay for
damages, totaling almost $100 million, for damages not suffered actually as a result of its
actions.  If the State/System thought a breach should lead to a windfall, whereby the actuary
would match sums already in the State coffers, then it should have specified as much in the
contract; it did not. 
II.  The Majority Opinion’s Main Underpinnings
A.  The State Is Not a Party to the Proceeding
The Majority opinion dispatches with any consideration of the State’s role by pointing
out that “[t]he State . . . was not a party before us, nor before the Board [of Contract Appeals]
. . . .”  Majority slip op. at 32.  The Majority finds supportive in this regard a medical
malpractice case in which, according to the Majority opinion, “we precluded a physician who
had been adjudicated as negligent from seeking contribution from the three alleged ‘joint
tortfeasors’ who were not joined as parties in the original action, because the [three
tortfeasors] did not have an opportunity to participate in the primary case.”  Majority slip op.
at 32 (analyzing Hashmi v. Bennett, 416 Md. 707, 7 A.3d 1059 (2010)).  
-9-
The instructive value of Hashmi is far from evident.  Here, we confront a breach of
contract, involving a government claim against a private contractor.  Hashmi was also a
medical malpractice case, involving only private and distinct (legally and biologically)
parties.  Moreover, in Hashmi, we held that a tortfeasor-physician could not seek contribution
from other alleged tortfeasors primarily because the hospital release protected them.  See
Hashmi, 416 Md. at 724-25, 7 A.3d 1069-70.  We then stated in the alternative (and, thus,
arguably in dicta) that a post-trial “judicial determination” of contribution would deprive the
alleged tortfeasors of “notice or . . . an opportunity to defend,” in violation of the Maryland
Rules.  Hashmi, 416 Md. at 725, 7 A.3d at 1070 (“Even if we were to determine that the . .
. [r]elease was ambiguous, we would not countenance the separate, post-trial proceeding Dr.
Hashmi proposes [of the other alleged tortfeasors] . . . .”); Hashmi, 416 Md. at 729, 7 A.3d
at 1072 (citation omitted). 
In the present case, Milliman is not trying to reduce possible damages by seeking
contribution from the State as a joint tortfeasor; it is arguing that there are little to no
damages in the first instance, given the fact that the non-breaching party did not suffer, in
fact, an actual loss.  Indeed, Milliman is asking this Court (fairly in my estimation) and the
Board of Contract Appeals not to blind itself to certain facts when determining the proper
measure of damages to make a non-breaching party whole.  Ordinarily, I would rebuff
contentions that the State lacked notice and an opportunity to defend itself, but doing so
credits Hashmi with an unjustifiable amount of applicability – comparing the present case
-10-
to Hashmi is like forcing a round peg into a square hole.  Rather, I will address the premise
of the Majority opinion’s damages calculation – that the State and the System are not part of
a single entity.  
B.  The State and the System Are Not One Legal Entity.
Acknowledging that “we have never had occasion to consider the identity of the
System and the State,” the Majority opinion considers in depth two foreign cases – Day v.
New Hampshire Retirement System, 635 A.2d 493 (N.H. 1994), and Traub v. Board of
Retirement of the Los Angeles County Employees Retirement Association, 670 P.2d 335 (Cal.
1983).  Both cases involve a government employee who was awarded, by an administrative
adjudication, workers’ compensation benefits and then attempted to use that decision to estop
collaterally the retirement system from denying similar benefits.  Day, 635 A.2d at 494;
Traub, 670 P.2d at 337.  In each case, the respective court concluded that, for purposes of
collateral estoppel, the workers’ compensation board and the retirement system were not “in
privity.”  Day, 635 A.2d at 497; Traub, 670 P.2d at 338.  They noted that any payout to the
government employee would come not just from the State, but also the employees who
contributed to the retirement system.  Day, 635 A.2d at 497; 670 P.2d at 338.  Those
employees were not represented in the initial workers’ compensation decision.  See Day, 635
A.2d at 497.
The present case does not involve the sometimes perplexing world of collateral
estoppel.  Rather, we confront the issue of contractual damages flowing to the State/ System
-11-
(including employees, who contributed voluntarily to a State-created and -managed fund). 
We need not concern ourselves with “privity”; we need only determine (as we did supra) that
the State and System are one entity for purposes of evaluating the true financial injury in this
case.  See A.S. Abell Pub. Co., 297 Md. at 35, 464 A.2d at 1072.  Nevertheless, even if the
“oneness” of the State and System – for purposes of calculating damages – depends on a
finding of privity, such evidence exists in the record.  The State, System, and employees all
possessed the same interest in the $34 million.  The State is obliged to make up any shortfalls
in the System; the System has a duty to govern toward fiscal solvency; and, the employees
want to secure their retirement future.   In short, their interests are aligned sufficiently. 
6
 The Majority opinion describes the question at hand as “how to measure damages
6
caused by errors in actuarial recommendations related to pensions systems . . . .”  Majority
slip op. at 26.  It determines that we must “place the [System] in the position it would have
been in but for the breach.”  Majority slip op. at 28.  I agree; however, the Majority opinion
strays too far from that premise.  
It concludes that, despite the State Government possessing the $34 million in question,
the State (through its appendage, the System) is owed another $34 million.  To do so, the
Majority opinion spends considerable time (as it must) arguing that the State and the System
are separate legal entities.  In particular, as noted supra, it analyzes at length Day v. New
Hampshire Retirement System, 635 A.2d 493 (N.H. 1994)  and Traub v. Board of Retirement
of the Los Angeles County Employees Retirement Association, 670 P.2d 335 (Cal. 1983).  It
also refers to Dardaganis v. Grace Capital, Inc., 889 F.2d 1237 (2d Cir. 1989) and  Board
of Trustees v. Mercer, 2003 Cal. App. Unpub. LEXIS 6236 (Cal. Ct. App. 2003), which I
shall discuss here.
In Dardaganis and Mercer, the question decided was whether the lost use of
contribution – that is, the difference in the rate of return between a government and its
retirement system – was included appropriately as “damages.”  The Dardaganis court held
that “[i]f, but for the breach, the [f]und would have earned even more than it actually earned,
there is a ‘loss’ for which the breaching fiduciary is liable.”  Dardaganis, 889 F.2d at 1243
(emphasis added).  The Mercer court ruled that the “use of lost investment income [is] a
(continued...)
-12-
C.  Maryland Has Not Adopted the “Unitary Creditor” Doctrine.
Milliman argues that the State and the System are one legal entity and that, as a result,
it “should be allowed to recoup or offset the benefit of the funds retained by the State against
any damages claimed by the System . . . .”  (Emphasis added.)  As part of this claim,
Milliman refers to the federal “unitary creditor” doctrine, a principle which allows federal
agencies to “set off debts owed by one agency against claims that another has against a single
debtor.”  Turner v. Small Bus. Admin., 84 F.3d 1294, 1296 (10th Cir. 1996) (en banc).  A
classic illustration is where Agency 1 owes money to a person, but that person owes money
simultaneously to Agency 2.  The agencies and individual debtor are permitted to setoff those
claims.
Transposed to the present context, such a claim fits awkwardly, as we are not dealing
with a company that simply owes money to the government, whether we define that
government as the State or the System.  I believe that the “set-off” claim may be better
understood under ordinary contract law and damages canons, as explained supra. 
Nonetheless, the argument may be made that, should the System receive a judgment for all
contributions and investment interest, Milliman would be able to assert a claim against the
State.  Thus, Milliman should be able to skip a step and simply have its own claim heard in
(...continued)
6
reasonable basis on which to calculate damages.”  Mercer, 2003 Cal. App. Unpub. LEXIS
6236, at *14 (emphasis added).  Neither court declared precedential law on the matter of
contributions, despite favorable dicta in Mercer.
-13-
the same action. 
Indeed, in a case remarkably similar to the one at bar, the U.S. District Court for the
Central District of California allowed an actuary who committed mathematical errors, which
caused a county government to underpay its retirement system, to argue for such a setoff. 
Tower, Perrin, Forster & Crosby, 2002 U.S. Dist. LEXIS 27916, at *29.  The actuary, in
particular, claimed that:
[A]ny recovery by [the retirement system] must be reduced
based on the amounts that allegedly should have been
contributed by the [c]ounty but were not, because [the retirement
system] and the [c]ounty are effectively a “closed system.” [The
actuary] contends that it is . . . entitled to offset . . . any funds,
including any earnings on such funds, the [c]ounty did not
contribute . . . and thus retained for other uses . . . .
Tower, Perrin, Forster & Crosby, 2002 U.S. Dist. LEXIS 27916, at *3.  “Even in the absence
of the precise articulation of the claim to be setoff against [the one at hand],” the court held
that a setoff defense is appropriate in light of the ultimate goal of “eliminat[ing] a
superfluous exchange of money between the parties . . . .”  Id. (internal quotation marks
omitted).  
To so conclude, the court needed to find sufficient mutuality between the actuary and
the government – enter the unitary creditor doctrine.  This reliance, the Majority opinion
concludes, renders the decision wholly-inapplicable to the present case, as “we have not
ascribed” to that doctrine.  Majority slip op. at 33 n.10.  I disagree respectfully.
In Lomax v. Comptroller of Treasury, 323 Md. 419, 420, 593 A.2d 1099, 1100 (1991),
-14-
we considered a case where a state school teacher, Mary Lomax, received retirement benefits
from the System.  The Comptroller of the Treasury (“Comptroller”) obtained a judgment and
lien against Lomax for unpaid income tax.  Id.  “In an attempt to satisfy this judgment against
Lomax, the Comptroller filed with the Clerk of the Circuit Court for Baltimore County a
request for writ of garnishment to be served on the . . . System[] . . . .”  Id.  We held that the
State could effectuate such an inter-governmental maneuver, explaining that:
In the instant case, the Retirement System and the
Comptroller are both agencies under the control of the same
sovereign, the State.  Maryland Code (1957, 1988 Repl. Vol.,
1990 Cum. Supp.), Art. 73B, § 16 provides that payment of all
pensions, as well as all expenses for the administration and
operation of the state retirement systems are obligations of the
State.  The [administrative] inconveniences enumerated in City
of Baltimore [v. Comptroller, 292 Md. 293, 439 A.2d 1095
(1982)] and Hughes [v. Svboda, 168 Md. 440, 178 A. 108
(1935), dealing with a local government paying benefits to the
State rather than local-government employees] clearly do not
apply here since the Comptroller and the Retirement System
work within the same governmental unit and both are even
represented by the same attorney, the Attorney General.  The
public affairs of the State government would in no way be
disrupted if these two agencies of the same government were
permitted to cooperate in the garnishment of Lomax’s pension
benefits.  City of Baltimore is clearly inapposite.
It is a fundamental principle of creditors’ rights that
creditors have a right to set-off and may apply moneys owed to
debts due.  See United States v. Munsey Trust Co., 332 U.S. 234,
67 S. Ct. 1599, 91 L. Ed. 2022 (1947): “The government has the
same right ‘which belongs to every creditor, to apply the
unappropriated moneys of his debtor, in his hands, in
extinguishment of the debts due to him.’”  Id. at 239, 67 S. Ct.
at 1602, 91 L. Ed. at 2027 (quoting Gratiot v. United States, 40
U.S. (15 Peters) 336, 370, 10 L.Ed. 759, 771 (1841)).  We doubt
-15-
that the Legislature intended to extinguish the State’s right to
accomplish through the legal process of garnishment that which
it might be entitled to do by a self-help mechanism such as
set-off.
Lomax, 323 Md. at 426-27 (emphasis added).
This is the most classic form of the unitary creditor doctrine, where one agency (i.e.,
the System) owes money to a debtor, but that debtor owes money to another agency (i.e., the
Comptroller).  Indeed, these were similar to the facts of the case in which the U.S. Supreme
Court adopted originally the unitary creditor doctrine – Cherry Cotton Mills v. United States,
327 U.S. 536, 66 S. Ct. 729, 90 L. Ed. 835 (1946).  See Turner, 84 F.3d at 1296-97 (“[T]he
Court’s language [in Cherry Cotton Mills] clearly indicates that agencies of the United States
government are deemed a unitary creditor . . . .”); Turner, 84 F.3d at 1296 (“[I]n Cherry
Cotton Mills . . . the Supreme Court made clear that the United States has a right to effect
interagency setoffs.”).  As a further indication that this Court adopted the unitary creditor
concept in Lomax, we quoted there Munsey Trust Co., a case which relies explicitly on
Cherry Cotton Mills to conclude that an agency need not pay a contractor who owed a greater
sum of money to another agency.  See Munsey Trust Co., 332 U.S. at 240, 67 S. Ct. at 1062,
91 L. Ed. at 2028.   
7, 8, 9
 The Majority opinion disagrees with the notion that, in Lomax v. Comptroller of
7
Treasury, 323 Md. 419, 420, 593 A.2d 1099, 1100 (1991), this Court adopted substantively
the unitary creditor doctrine, arguing that “[w]here the unitary creditor doctrine has been
embraced, it has been in explicit terms: ‘[T]he United States is treated as a unitary creditor,
and agencies of the Untied States government . . . may set off debts owed by one agency
(continued...)
-16-
III.
My reservation with the Majority opinion stems from its disregard of otherwise
(...continued)
7
against claims that another agency has against a single debtor.”  Majority slip op. at 33 n.10
(emphasis added) (quoting Turner v. Small Bus. Admin., 84 F.3d 1294, 1296 (10th Cir. 1996)
(en banc)).  The case on which the Majority opinion relies, Turner, acknowledges that the
Supreme Court adopted the unitary creditor doctrine in Cherry Cotton Mills v. United States,
327 U.S. 536, 66 S. Ct. 729, 90 L. Ed. 835 (1946).  See Turner, 84 F.3d at 1296-97 (“[T]he
Court’s language [in Cherry Cotton Mills] clearly indicates that agencies of the United States
government are deemed a unitary creditor . . . .”); see also Hi. Airlines, Inc. v. United States,
122 F.3d 851, 852-853 (9th Cir. 1997) (“The Supreme Court clearly adopted the unitary
setoff rule for government agencies in the nonbankruptcy context in Cherry Cotton Mills .
. . .”); In re Nuclear Imaging Sys. Inc., 260 B.R. 724, 733 (Bankr. E.D. Pa. 2000) (“The
decision most often cited in support of the ‘unitary creditor’ principle is Cherry Cotton Mills
. . . .”).  The Supreme Court adopted this doctrine in Cherry Cotton Mills despite never using
the talismanic words “unitary” or “creditor.”  See generally Cherry Cotton Mills, 327 U.S.
at 536, 66 S. Ct. at 729, 90 L. Ed. at 835.
 The Majority opinion concludes that the System is entitled to damages, “no matter
8
whether the fund’s assets grew as a whole . . . .”  Majority slip op. at 28.  I disagree. 
According to the record, one Milliman error caused underpayment to the System.  Another,
unrelated Milliman error, however, caused the System to take in more money than required
actually.  In particular, Milliman overestimated the amount required to meet the Cost of
Living Adjustment (“COLA”), resulting in a $160 million addition to the three retirement
plans at bar.  This is twice the amount the System seeks in damages.  Had Milliman presented
more evidence before the Board of Contract Appeals of the overfunding issue, I would be
more inclined to tether my dissent to these grounds.  
 Milliman also argues that there are no damages because the State is obliged to pay
9
any liabilities in the System.  The Board of Contract Appeals rejected this averment because
to do otherwise would leave the State or System without any effective recourse against a
breaching actuary.  Like the Board of Contract Appeals, I do not find Milliman’s claim
particularly persuasive, but I will comment briefly.  
As explained in this dissent, an actuary faces monetary consequences if it breaches
the contract – the amount of actual loss suffered by the State.  If Milliman did not inflict any
damages in fact, then, like any other breaching party, it should not be required to provide
recompense at law.  If the State is not satisfied with this result, it could have – and, in my
opinion, should have – detailed in the contract how damages would be calculated.
-17-
accessible and dispositive contract axioms, the polestars of the damages question.  When a
party claims a loss, it must demonstrate the reality of that loss – the State asks for another $34
million, despite previously collecting and enjoying the same.  Moreover, I fail to see how the
set-off and unitary creditor principles – if necessary to bring into focus the full damages issue
– are not applicable to the present case.  I harbor also some hesitation regarding our
eagerness to declare agencies, especially those that depend on State Government funds, as
separate and unique entities, approximating corporate subsidiaries.  But see Maryland
Transportation Authority v. Maryland Transportation Authority Police Lodge #34 of the
Fraternal Order of Police, __ Md. __ (2001) (No. 131, September Term, 2010) (filed 20
June 2011) (holding that the Maryland Transportation Authority did not have total autonomy
such that it could bargain collectively, even though the Legislature delegated to it a great deal
of authority, including the ability to raise revenues through tolls).  
In my opinion, we should direct a remand to the Board of Contract Appeals with
instructions to recalculate damages to reflect the fact that the State and the System are a
single entity.  Practically speaking, the Board of Contract Appeals should determine and then
limit damages to the difference between what the State earned, in fact, and what the System
would have earned, with respect to a return on investment of the $34 million in “missing”
contributions.
Judge Murphy and Judge Adkins authorize me to state that they join the views
expressed in this dissenting opinion, except that Judge Adkins does not subscribe to footnote
-18-
8.
-19-