Federal Court Ruling on Verizon Pension Risk Transfer: Key Insights

A federal judge in the Southern District of New York recently ruled that there was no standing to challenge a significant pension risk transfer involving Verizon, clearing the company of alleged breaches under the Employee Retirement Income Security Act (ERISA). This decision pertains to a $5.7 billion transaction where Verizon transitioned pension obligations to group annuities managed by Prudential Insurance Co. of America and RGA Reinsurance Co.

In the case of Dempsey et al. v. Verizon Communications Inc. et al., Judge Alvin Hellerstein determined that the plaintiffs, comprising former Verizon employees and retirees, failed to show a "substantial risk of imminent harm" from the annuities purchase. Consequently, the Article III standing necessary to proceed with the lawsuit was deemed insufficient. The court also found no viable claims of fiduciary duty breaches or prohibited transactions under ERISA, thus exonerating Verizon and State Street, the independent fiduciary monitoring the transaction.

Judge Hellerstein emphasized the necessity for plaintiffs to convincingly demonstrate that no reasonable fiduciary would have selected the involved annuity providers. This, coupled with Verizon retirees receiving unchanged monthly pension payments post-annuitization, led to the lawsuit's dismissal. The case was closed with prejudice, blocking any further attempts to pursue the same claims in that court.

The plaintiffs argued that the pension risk transfer heightened financial risks by shifting responsibility from a federal ERISA oversight framework to state-regulated insurance regimes. However, Hellerstein rejected this argument by citing the Supreme Court's decision in Thole v. U.S. Bank, which requires a concrete financial impact on participants to establish standing in such cases.

Notably, this decision came before the Department of Labor's (DOL) filing of an amicus brief supporting Lockheed Martin in a separate pension risk transfer case. The DOL reiterated that properly executed annuity transactions do not infringe ERISA guidelines, and that hypothetical risk claims are insufficient for asserting fiduciary breaches.

The incidence of pension risk transfer lawsuits has declined, with only one new case emerging in 2025 compared to twelve filed the prior year. The DOL's position, noted in their Lockheed brief, underscores concerns that litigation over these transactions might hinder beneficial outcomes for defined benefit pension plans.