An appeals court in New Orleans heard arguments Wednesday in Lee v. Verizon, a class-action challenging the communications company's pension-transfer agreement with Prudential Insurance Co.
The suit claims that Verizon's de-risking agreement with Prudential, which transferred about $7.5 billion in the company's pension obligations, accounting for a quarter of all its pension liabilities, was a breach of fiduciary standards under the Employee Retirement Income Security Act.
"This case is being closely monitored by corporate pension sponsors, pension fund managers, the annuity insurance industry and ERISA legal professionals throughout the nation," Curtis L. Kennedy, the attorney representing the plaintiffs, said. "Indeed the case will develop ERISA law that will have repercussions on retiree pensioners throughout the nation."
Recommended For You
The plaintiffs filed a motion in November 2012 seeking to block the pension transfer, but a federal judge in the Northern District of Texas allowed the transaction to go through. The same court then certified a class-action in April 2013, allowing the 41,000 Verizon employees impacted by the pension transfer to pursue their case.
Specifically, the plaintiffs claim the transfer deprives them of Pension Benefit Guarantee Corp. protections, and that the agreement was not in compliance with ERISA or PBGC's "standard termination procedures."
Retirees affected by the buyout would lose all ERISA protections, including mandated financial disclosures of how their retirement assets are invested and access to federal courts, the plaintiffs argued in their request for an injunction against the deal.
"Prudential will not be subject to ERISA's fiduciary duties standards, minimum funding standards and disclosure requirements. Prudential will not be required to disclose to any transferred retiree how his or her annuity funding is invested and who is in charge of underlying investments," the court documents said.
In June 2013, Judge Sidney Fitzwater dismissed those claims, along with claims brought by a prospective class of 50,000 Verizon employees not directly affected by the transfer. Fitzwater also dismissed an amended complaint last April.
In doing so, he suggested nothing in ERISA prevented Verizon from transferring pension obligations to Prudential.
"At bottom, plaintiffs are disagreeing with the rights of a settlor under ERISA, and such a disagreement must addressed by Congress through requests for legislative changes to ERISA, not through litigation that complains of the decisions that ERISA empowers a plan sponsor settlor to make," wrote Fitzwater.
In their appeal, plaintiffs argued the decision to allow the transaction undermined federal law and the "rigor" Congress intended federal courts to apply in monitoring fiduciaries.
The plaintiffs also claimed Verizon retirees were not consulted prior to the decision, or given the choice of accepting a lump-sum buyout, as companies such as General Motors and Ford have done.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
