Rising Litigation Trends in Pension Risk Transfer Cases

The Retirement Learning Center has noted a trend in pension risk transfer (PRT) litigation, particularly after companies like Lumen Technologies faced lawsuits related to their PRT implementations. PRTs involve transferring the responsibility of pension plan benefits to an insurance provider, which raises concerns about the safety and stability of the annuity carriers chosen by plan sponsors. Companies such as Lumen, AT&T, and Lockheed Martin have all faced scrutiny for their selection of insurance providers, particularly in light of private equity involvement in the insurance sector, which introduces additional risks for participants in these pension plans.

The article highlights the fiduciary responsibilities of plan sponsors under ERISA when selecting annuity providers for PRTs, emphasizing the need to choose the “safest available” providers rather than focusing on cost. The increased legal challenges surrounding PRTs necessitate careful documentation and due diligence by plan sponsors to safeguard against potential liabilities. The Department of Labor is currently reviewing guidelines related to these practices, reflecting a shift in regulatory focus as litigation increases.