Labour Department's Position on Pension Risk Transfers: A Legal Perspective

DOL Steps Into Lockheed Martin Pension Risk Transfer Fight, Signaling How Fiduciaries Should Think About PRTs

The U.S. Department of Labor just weighed in on one of the most closely watched pension risk transfer disputes, filing an amicus brief in Konya v. Lockheed Martin Corp. tied to Lockheed Martin’s transfer of certain pension liabilities to Athene. The case is already past the motion-to-dismiss stage in the District of Maryland, and it has now moved into the Fourth Circuit, putting the spotlight on two questions that matter to every insurer and every plan sponsor watching the PRT market: who has standing to sue, and what “prudence” really means when selecting an annuity provider. (dol.gov)

At a high level, plaintiffs argue the transaction increased risk compared with choosing a more “traditional” annuity provider. The Labor Department’s position is that courts should not use these lawsuits to create new rules by implication, especially where participants are still receiving all promised benefits. (dol.gov)

“PRTs work — swimmingly.”
U.S. Department of Labor (as quoted in industry reporting) (PSCA)

Why this case is different from earlier PRT challenges

PRT litigation has been building for years, but many cases stumbled early on standing. That’s largely because defined benefit participants typically keep receiving the same benefit payments after a transfer, which makes it hard to prove a concrete, personal injury under Article III. The Supreme Court’s Thole v. U.S. Bank decision is the backdrop: in a defined benefit plan context, participants generally need to show personal financial harm, not just alleged harm to the plan. (Supreme Court of the United States)

In Konya, Judge Brendan Abell Hurson allowed the case to proceed beyond the motion-to-dismiss phase, noting that allegations of future injury can be sufficient if the risk is “imminent and substantial.” That framing is a big reason the appeal is being watched so closely by both plan sponsors and insurers active in buyouts. (GovInfo)

“While hypothetical or conjectural injuries will not suffice, an allegation of future injury may be sufficient if ‘the risk of harm is sufficiently imminent and substantial.’”
Judge Brendan Abell Hurson (PSCA)

The DOL’s core message: clarity on standing and a practical roadmap for fiduciaries

In its brief, the Department of Labor presses for dismissal on jurisdictional grounds, arguing plaintiffs have not shown the kind of “certainly impending” injury required for standing in this context, and cautioning against an overbroad reading of Thole that could distort how ERISA disputes are evaluated. (dol.gov)

But the more practical takeaway for the insurance industry is the Department’s emphasis on process. PRTs are expressly permitted under ERISA, and the DOL points to the long history of these transactions functioning as designed, while also underscoring that fiduciaries still must conduct a prudent annuity selection process. (dol.gov)

Interpreting IB 95-1 in 2026: “Safest available” is not a one-variable test

Most insurers know Interpretive Bulletin 95-1 as the annuity selection playbook. It’s the guidance that says fiduciaries should take steps “calculated to obtain the safest annuity available,” unless circumstances make another choice better for participants. In practice, that has never meant “pick the single highest-rated carrier and stop thinking.” It means document a disciplined evaluation of the provider’s capacity to perform over time. (Mercer)

The DOL’s brief leans into that real-world approach. The idea is not that choosing anything other than the absolute “safest” automatically equals a breach. Instead, it’s about whether fiduciaries ran a prudent process, including looking at the insurer’s financial strength and the characteristics of the insurer that relate to long-term claims-paying ability. (dol.gov)

A quick view of what’s at stake for insurers, sponsors, and advisors

The one place to use bullets: what to do now if you’re in the PRT ecosystem

• Insurers: Pressure-test how you explain claims-paying capacity to non-insurance audiences, especially around general account strategy, capital, and governance, because those are the themes fiduciaries are being told to evaluate and document. (Mercer)

• Plan sponsors and fiduciaries: Treat IB 95-1 like an evidence file, not a checklist. The selection memo matters, the comparative rationale matters, and the record of deliberation matters. (Mercer)

• Advisors and consultants: Assume standing arguments will stay central. Build a diligence package that is litigation-resilient, not just transaction-ready. (dol.gov)

The bottom line

This isn’t just a courtroom debate about one Lockheed transaction. It’s a live test of how far PRT plaintiffs can get without showing present-day benefit loss, and a signal from the Labor Department that it wants consistent, process-focused fiduciary standards rather than new rules emerging from case-by-case outcomes. For insurers, the lesson is straightforward: in the PRT market, product pricing and execution still matter, but the story you can support about long-term performance and the documentation that helps fiduciaries prove prudence may matter just as much. (dol.gov)