U.S. Advocacy Groups Urge 4th Circuit to Dismiss Speculative Pension Risk Transfer Claims

A coalition of employer advocacy groups, including the U.S. Chamber of Commerce, the ERISA Industry Committee (ERIC), and the American Benefits Council, has filed an amicus brief urging the U.S. 4th Circuit Court of Appeals to overturn a recent district court decision in the case Konya v. Lockheed Martin Corp., which challenges pension risk transfers (PRTs). The plaintiffs in the original complaint allege that Lockheed Martin violated the Employee Retirement Income Security Act (ERISA) by transferring pension plans to a private annuity provider, claiming this action jeopardizes retirement security and breaches fiduciary duties by selecting a risky annuity provider over safer options.

The employer groups argue that engaging in a PRT is a settlor function and thus outside the scope of ERISA's fiduciary protections. They note that while the source of pension benefits changes after a PRT, the amount of benefits remains consistent, and plaintiffs have not demonstrated that they have failed to receive their monthly benefits. Instead, allegations focus on the potential risk of default by annuity providers, which the brief characterizes as speculative.

The coalition emphasizes that recent litigation against PRTs, although lacking concrete evidence of imminent harm, has a chilling effect on these transactions. These PRTs are legally permissible and offer plan sponsors a way to gain certainty over pension obligations. The groups caution that ongoing lawsuits could divert resources away from managing retirement plans toward legal defenses, potentially impacting participant retirement security indirectly.

The amicus brief also highlights an opportunity for the 4th Circuit to clarify legal standing requirements for claims seeking equitable relief in pension cases. The coalition urges the court to dismiss claims based on conjecture about increased risk of benefit loss, emphasizing that such speculative assertions do not constitute evidence of injury under ERISA.

This development underscores ongoing legal and regulatory scrutiny around PRTs and their role in pension management strategy. The outcome of this appeal could influence how courts evaluate fiduciary responsibilities and the boundaries of ERISA concerning PRTs, shaping future pension risk transfer practices and litigation risks for plan sponsors in the U.S.