Judge disconnects lawsuit vs. Verizon pension transfer
By National Underwriter
By Maria Wood
A U.S. District Court judge in Texas has dismissed a lawsuit by Verizon retirees to stop the transfer of their pensions to annuities distributed by Prudential.
In an opinion handed down on Monday, Sidney A. Fitzwater, chief judge for the U.S. District Court for the Northern District of Texas, Dallas Division, ruled in favor of Verizon, but also permitted the plaintiffs to re-plead the case.
In October of last year, Verizon signed an agreement to transfer $7.4 billion in pension obligations that covered roughly 41,000 Verizon Management Pension Plan participants to Prudential. Soon after, members of the Association of BellTel Retirees sued to halt the purchase of the group annuity contract, arguing that it violated ERISA rules and would leave the members with weaker protections because the annuities would not be covered under the federal Pension Benefit Guaranty Corp.
Fitzwater dismissed the plaintiffs’ claims that Verizon violated its fiduciary duty and paid an excessive fee to transact the transfer. Prudential was paid an additional $1 billion, according to the suit, Lee v. Verizon Communications, Inc., (3:12-CV-4834-D). “Despite the size of the alleged additional payout, the court cannot reasonably infer from the allegation in the amended complaint that it was unreasonable to pay Prudential approximately $8.4 billion,” Fitzwater wrote.
The judge further stated that the plaintiffs failed to prove they would be harmed by the pension transfer through any loss of benefits or rights. “Understood in the this broader context, it is clear that the [ERISA] regulation is focused on the benefits to be provided under the Plan rather than on the source of the benefits per se and does not relate to whether the Plan itself must continue to pay the benefits,” Fitzwater wrote.
Due to the financial strain of providing pensions to retirees, large corporations like Verizon and GM have moved to shift those obligations to annuity providers, such as Prudential. The trend has even traveled north of the border when the Canadian Wheat Board signed a C$150 million annuity policy with Sun Life Assurance Co. That deal was announced last week.
Originally published on LifeHealthPro.com