Verizon headquarters
Verizon was hit with a class-action lawsuit last week by three ex-employees who say the company improperly shifted pension benefit responsibilities to an insurance company, in the latest pension risk transfer lawsuit challenging the efficacy of insurance companies managing pension funds. However, insurance company Prudential, which is managing the pensions, is not named as a defendant in the Verizon lawsuit. Plaintiffs are suing Verizon and State Street Global Advisors, which served as “the independent fiduciary” in putting the deal together, according to the suit.
“State Street directly profited from the annuitization transactions through its common stock holdings in Verizon, Prudential Financial, … and RGA,” the lawsuit states. “State Street’s own financial interests were improperly served … by helping Verizon obtain the cheapest available annuity provider, as opposed to the ‘safest available’ annuity provider as required by ERISA.”
Recommended For You
Ex-Verizon engineer Maureen Dempsey and two other former employees, Heinz Schlenkermann and Chris Shelton, filed their complaint in the U.S. District Court for the Southern District of New York. They allege that the telecommunications company breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) and jeopardized their retirement savings.
In February 2024, Verizon inked the $5.9 billion pension risk transfer (PRT) deal for Prudential and RGA Reinsurance Co. to “each irrevocably guarantee and assume 50 percent of the benefit obligation to the retirees,” according to a press release. The companies would manage the pensions of 56,000 Verizon retirees and their beneficiaries. This is the second PRT deal between Prudential and Verizon, which completed a $7.5 billion transfer in 2012 that covered 41,000 Verizon retirees.
The recent lawsuit claims that the 2024 transaction “resulted in all 56,000 of these retirees losing all of the uniform protections intended by Congress under ERISA, including the federal backstop provided to all ERISA-protected plans by the Pension Benefit Guaranty Corporation (PBGC),” according to the suit.
As the retirement industry evolves from guaranteed lifetime pension plans to 401(k)s, PRTs have become the linchpin connecting the past, present, and future of retirement benefits. These PRTs allow firms to offload the burdensome administration of allocating pension plans. Last fall, IBM completed a $6 billion pension risk transfer deal with Prudential in a group annuity buyout. However, as private equity firms ramp up their pursuit of PRT deals, the number of related lawsuits has surged. 2023 saw a record 773 PRTs, and that number is expected to grow further. Increasingly, private equity firms are seeking to purchase stakes in annuity assets to gain access to a permanent capital stream.
Meanwhile, there has also been a surge of employee PRT lawsuits in the past year, involving Lockheed Martin, AT&T, Alcoa, and GE. According to the lawsuits, these companies bypassed their fiduciary responsibility to select the safest annuity for their employees’ pension plans.
————————————————————
From: BenefitsPRO
© 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.
Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
