Federal Court Ruling on Pension De-risking and ERISA Standing
A recent ruling from a federal court in Pennsylvania adds to the judicial division on Article III standing in pension de-risking lawsuits related to ERISA (Employee Retirement Income Security Act) plans. In the case of Schoen v. ATI, Inc., the court upheld the dismissal of a class-action lawsuit due to a lack of standing, reinforcing prior decisions in this ongoing legal landscape.
The lawsuit challenged the transfer of pension obligations from ATI, Inc. to Athene Annuity and Life Assurance Co., involving $1.5 billion in pension liabilities. Judge J. Nicholas Ranjan ruled that the former ATI employees did not have standing under Article III. This aligns with the precedent set by the Thole v. U.S. Bank decision, which clarifies that plan participants must show an impact on their benefits to establish standing.
The plaintiffs, represented by Schlichter Bogard LLC, alleged multiple harms, including diminished retirement payment rights and risks related to Athene's financial stability. However, the court found these claims speculative, further dismissing the case. The court noted that assumptions about Athene's potential failure remained hypothetical and that no existing conditions could substantiate a probable loss of benefits.
Despite acknowledging that other courts have found similar evidence persuasive, the court maintained its position based on its interpretation of the "substantial risk" standard. This decision suggests a nuanced application rather than a change in the legal standard itself.
The Department of Labor has taken a stance in favor of plan sponsors in related cases, asserting that pension risk transfers do not constitute a breach of fiduciary duty, as the choice to transfer falls under settlor functions. Recent amicus briefs in different appeals reflect DOL’s efforts to refine the regulatory landscape and deter litigation-driven policymaking.
For those managing pension plans or contemplating risk transfers, the Schoen ruling offers strategic insights. It indicates that proving Article III standing continues to be a decisive factor in litigation, and it reinforces the importance of documenting fiduciary decisions and processes when conducting these transactions. This case highlights the critical nature of compliance strategies and diligent administration in the face of potential legal challenges related to pension risk transfers.