Contrasting Court Rulings on Pension Risk Transfer Legal Standing

On March 28, 2025, two federal district courts delivered contrasting rulings about the standing of participants in defined benefit pension plans to sue fiduciaries engaged in pension risk transfer (PRT) transactions. The cases, Camire v. Alcoa USA Corp. and Konya v. Lockheed Martin Corp., question whether such participants can initiate legal action against plan fiduciaries for transferring pension plans to private annuities. This issue underscores the complexities in regulatory compliance surrounding pension transfers.

Understanding Pension Risk Transfer Transactions

PRT transactions involve employers transferring pension obligations to insurers by purchasing group annuity contracts, effectively shifting the responsibility for future benefit payments. After a PRT transaction, participants no longer receive protection under ERISA, having to rely instead on state guaranty associations rather than the federal Pension Benefit Guaranty Corporation for coverage.

Divergent Court Rulings

In Camire v. Alcoa USA Corp., the District Court for the District of Columbia decided that participants lacked standing under Article III of the Constitution. The court cited the precedent set by Thole v. U.S. Bank N.A., which required participants to demonstrate an injury-in-fact through monetary losses or benefit reductions. Since the Camire plaintiffs could not show actual harm, such as reduced benefit payments following the PRT transactions, they were deemed to lack legal standing.

Conversely, the District Court of Maryland in Konya v. Lockheed Martin Corp. ruled that plaintiffs did have standing. It agreed with claims that the PRT transaction posed significant risk due to inadequate past performance by the annuity provider and lack of appropriate fiduciary oversight. Unlike Camire, the court in Konya found evidence of increased risk of future harm sufficient to establish standing and highlighted potential breaches in fiduciary duty concerning annuity provider selection.

Implications for Industry Stakeholders

These conflicting court decisions highlight ongoing debates over participants' legal standing in PRT transactions and underline the divergent interpretations of required injury demonstration for Article III standing. As companies increasingly use PRT transactions to manage risks related to legacy defined benefit plans, further legal challenges are anticipated. This litigation area remains a critical focus for ERISA practitioners as they navigate regulatory compliance, fiduciary responsibilities, and participant protections in the evolving insurance industry.