ACLI: Pension risk transfer lawsuits based on ‘misleading allegations’

Insurance companies taking on billion-dollar pension risk transfers are subject to “robust and extensive” oversight, the American Council of Life Insurers wrote in a pair of court briefs.

The ACLI filed the amicus briefs in two ongoing PRT class-action lawsuits filed by former employees of Verizon and Allegheny Technologies. They claim their former employers breached their fiduciary responsibilities by shifting pension obligations to a “highly risky, private equity-controlled insurance company,” in the words of ATI plaintiffs.

PRT is a red-hot business with insurance companies and financial firms eager to take over the large pools of funds. The deals bring in large inflows, which insurers or firms who own them can invest and reap significant profits.

That does not mean the long-term financial obligations to policyholders are ignored, ACLI told the courts.

“Plaintiffs in both cases make misleading allegations about the risk to participants associated with pension risk transfers,” said ACLI President and CEO David Chavern. “Life insurers are the experts at managing long-term risk, which is why companies are increasingly turning to them to fulfill pension plan commitments.”

The briefs highlight the “stringent nature of state regulatory oversight” that holds life insurers to their their lifetime obligations to retirees, ACLI said in a news release. Since the implementation of enhanced reserving and other solvency rules in the mid-1990s, no retirees whose pensions were transferred to an insurance company annuity has seen a reduction in their benefits due to an insurer insolvency.

Pension risk transfers also remove a significant financial and administrative burden for companies, the ACLI said, which enables them to deploy more of their resources toward their regular business operations.

“Unburdened by their pension obligations, employers are in a much better financial position to innovate, grow and create new jobs,” Chavern noted.

Similar claims

The two lawsuits have taken different paths but include similar claims.

Five ATI retirees filed their lawsuit in August, alleging that the company violated the Employee Retirement Income Security Act when it transferred the pension obligations for 8,200 employees in October 2023. ATI transferred $1.5 billion of pension obligations to either Athene Annuity and Life Co. or Athene Annuity & Life Assurance Co. of New York., the complaint states.

ERISA requires that fiduciaries, including retirement plan trustees, administrators and investment committee members, act solely in the interest of employees who participate in defined benefit pension plans.

While ERISA does not prohibit an employer from transferring pension obligations to an insurance company, since its 1994 amendment, the Department of Labor has consistently stated that ERISA requires a fiduciary to obtain the “safest annuity available” and an independent fiduciary to recommend the annuity provider with “the highest claims-paying ability willing to write the business,” the lawsuit said.

The ATI plan administrative committee and State Street Global Advisors Trust Co., named as defendants in the lawsuit, filed a motion to dismiss.

“Plaintiffs have incurred no injury and have not identified any promised retirement benefit they
have not received,” a brief supporting the motion reads.

An Athene spokesperson released this statement to InsuranceNewsNet:

“As we have consistently maintained, these are frivolous claims without merit, driven by predatory trial lawyers targeting the pension risk transfer industry as a whole. Independent insurance experts recognize the facts: Athene is a safe and secure annuity provider with a fortress balance sheet with $31 billion of regulatory capital and strong credit ratings.”

Amended complaint filed

The group of former Verizon employees filed an amended complaint on April 25.

Filed in the Southern District of New York, the Verizon pensioners claim the PRT deal agreed to in March 2024 threatens their retirement funds. Verizon inked the $5.9 billion PRT deal for Prudential Financial and Reinsurance Group of America to manage the pensions of 56,000 Verizon retirees and their beneficiaries.

“Impacted retirees are quite rightly fearful and concerned about their futures, the fate of their
retirements, and the financial well-being of their beneficiaries,” the lawsuit reads.

Prudential and RGA agreed to “irrevocably guarantee and assume 50% of the benefit obligation to the retirees, except in certain jurisdictions where Prudential will irrevocably guarantee and assume 100% of the benefit obligation,” a news release said.

The transaction is the second major PRT deal between Prudential and Verizon. In 2012, Prudential completed an approximately $7.5 billion transfer that covered approximately 41,000 of Verizon’s retirees.

Neither Prudential or RGA is named as a defendant in the new lawsuit. Instead, plaintiffs are suing Verizon, several Verizon groups connected with the pension plan, and State Street Global Advisors Trust Co.

In an April 4 motion to dismiss, defendants say that disagreement with an insurance company’s choice to run a benefit program is not a basis for a lawsuit. Plaintiffs pointed out that Prudential “has done more than $90 billion in PRT transactions” since 2012.

“Plaintiffs do not allege that Prudential has ever missed a payment or defaulted and been unable to pay benefits pursuant to these PRTs,” defendants say in a brief supporting their motion to dismiss. “This demonstrates that Prudential is in fact not risky. It is implausible to believe that practices Prudential has used without issue for at least a decade—practices in place as Prudential assumed and made payments related to over $90 billion in PRT obligations—somehow now create an imminent risk of failure.”

Who is riskier?

In its brief, the ACLI points to a 2025 report by the National Organization of Life & Health Guaranty Associations, which found that no insurer with pension risk transfer obligations has failed since the 1990s.

In contrast, in 2019, the Pension Benefit Guaranty Corp. studied 500 plans that had gone insolvent between 1998 and 2012. Of those 500 plans, 187,000 participants received a benefit cut averaging $45,000. In aggregate, that came to $8.5 billion, with an average reduction of 24% of the pension, the ACLI pointed out.

“Life/annuity insurers continue to play a vital role in providing for Americans’ long-term financial security through the provision of annuities, including those purchased by employers in a pension risk transfer arrangement,” the ACLI brief states.

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