Can the PBGC Keep Protecting DB Participants?

As private insurers increasingly take on defined benefit plan liabilities, two attorneys specializing in the Employee Retirement Income Security Act argued in a recent white paper that DB participants still deserve federal protection under the Pension Benefit Guaranty Corporation after annuitization.

In “The Forgotten Promise: Why PBGC Retirement Benefit Guarantees Should Continue After Pension Risk Transfer Transactions,” Kevin O’Brien and Spencer Walters of Ivins, Phillips & Barker asserted that current PBGC policy unlawfully withholds protection Congress never intended to remove.

Employers with defined benefit plans are increasingly offloading their pension plans through risk transfers, which usually move the pension obligations to an insurer. The transactions have recently garnered legal scrutiny. As of mid-October 2025, 10 lawsuits related to pension risk transfers remained active across U.S. district courts, according to the PRT Litigation Status Tracker curated and provided by Davis & Harman LLP, a law firm that represents employers in ERISA disputes.

When such deals are made, retirees lose PBGC coverage if an insurance company later fails. The PBGC maintains that its guarantees end once an employer distributes annuity contracts, effectively removing retirees from federal protection. That stance has become central to recent lawsuits—including Konya v. Lockheed Martin Corp. and Doherty v. Bristol-Myers Squibb Co.—in which courts recognized the loss of PBGC guarantees as a “tangible harm,” supporting retirees’ right to sue.

O’Brien and Walters contended that the PBGC’s position is “unsupported by statute.” They argued that ERISA guarantees all non-forfeitable benefits “under a single-employer plan which terminates”—language that, in their view, includes annuity payments made after a plan is transferred to an insurer.

Their analysis drew on multiple legal and historical points:

• The PBGC’s own 1981 regulation stating that if an insurer failed, the PBGC “would provide the necessary benefits”;

• In the 1980s, Congress twice rejected PBGC-backed proposals to remove this responsibility; and

• The legislative history of the 1986 Single-Employer Pension Plan Amendments Act showed that lawmakers intended PBGC obligations to persist even after standard terminations.

The attorneys argued that the PBGC in 1991 reversed its interpretation to limit financial exposure after high-profile plan failures in the airline and steel industries—an about-face that “achieved by fiat what [the PBGC] failed to achieve in Congress.”

Legal Precedent of Agency Authority

The paper also addressed the U.S. Supreme Court’s 2007 ruling in Beck v. PACE International Union, which suggested that PBGC liability ends when annuities are purchased. O’Brien and Walters emphasized that those remarks were not part of the court’s holding and conflict with the plain statutory text.

The authors also noted the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, which ended the longstanding Chevron doctrine of deference to agency interpretations. They argued that the reduced standard further makes the PBGC’s position susceptible to legal challenges.

Restoring PBGC coverage for annuitized retirees, the authors argued, would realign the agency with its original mission “to provide for the timely and uninterrupted payment of pension benefits.” They noted that insurer failures are rare and typically cushioned by state guaranty funds, suggesting minimal financial risk to the PBGC.

“The risk in covering insurance company failures is limited,” they wrote.