By David Dankwa
Retired Verizon Communications employees whose pension benefit payments were transferred to Prudential through an innovative group annuity contract have won the right to proceed with a class-action lawsuit.
On March 28, a U.S. district court judge in Dallas certified the class action, which was filed on behalf of 41,000 Verizon management pension plan participants. The same federal judge, Sidney Fitzwater, previously rejected efforts by plan participants to block the December 2012 transfer.
Last year, as part of a plan to reduce its pension liabilities, Verizon transferred $8.5 billion worth of assets to Prudential by purchasing a group annuity contract. Under the transaction, Prudential assumed the obligation to pay annuity benefits to plan participants who began receiving pension payments prior to Jan. 1, 2010.
The retirees allege the transaction violates the Employee Retirement Income Security Act (ERISA). In particular, they allege that the transaction violates the requirement to act in accordance with plan documents, the duty of loyalty and impartiality, and to diversify plan investments. They claim that the transaction strips them of federal rights and protections under ERISA and are demanding additional disclosure surrounding potential loss or reduction of benefits.
Verizon and Prudential insist that the retirees’ pension benefits are well protected by meaningful safeguards under the annuity contract.
Last year, Prudential entered into a similar pension transfer arrangement with General Motors. Under that transaction, Prudential received $25 billion in premium from General Motors to assume the pension benefits of 110,000 salaried retirees.
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