Three Verizon Communications Inc. retirees are suing their former employer, along with fiduciary State Street Global Advisors, for transferring pension plan liabilities to two allegedly “risky” insurance companies.

The retirees filed the pension risk transfer complaint on December 30, 2024, in U.S. District Court for the Southern District of New York, alleging that Verizon and SSGA violated their fiduciary duties when they chose to transfer $5.9 billion in pension liabilities to group annuity contracts with Prudential Financial Inc. and Reinsurance Group of America Inc. The transactions, which closed in March 2024, transferred the payment of benefits for 56,000 retirees.

Dempsey et al. v. Verizon Communications Inc. et al. claims that Verizon and SSGA chose the “cheapest available” annuities, as opposed to the “safest available,” which is the standard set by the Department of Labor’s Interpretive Bulletin 95-1. The plaintiffs are being represented by Edward Stone Law P.C., which also has filed other PRT-related lawsuits, including one against SSGA and Bristol-Myers Squibb Co.

“The combination of unique risks posed by the Verizon/[Prudential]/RGA transaction is contrary to the best interests of the impacted Verizon retirees, and has resulted in less secure pension benefits for those retirees,” the plaintiffs allege in the complaint. “The Verizon retirees have now been transformed into certificate holders under risky group annuities that are no longer regulated by ERISA or insured by the Pension Benefit Guaranty Corporation (‘PBGC’). As a consequence, impacted retirees are quite rightly fearful and concerned about their futures, the fate of their retirements, and the financial well-being of their beneficiaries.”

Continuing Trend

The lawsuit is the most recent in a spate of filings over the past year targeting the choice of annuity provider as jeopardizing the retirement savings of participants in employer-sponsored defined benefit plans.

Many of those lawsuits targeted PRT transactions done with Athene Annuity Life & Co., including those by General Electric Co., AT&T Inc. and Lockheed Martin. Athene has not been named as a defendant in those cases and has shot back against claims, calling them “baseless” and driven by “attorneys who are attempting to enrich themselves.”

Neither Prudential nor RGA were named as defendants in the Verizon lawsuit, and RGA did not respond to request for comment. 

“In filing this lawsuit, class action attorneys are attacking the state insurance regulatory system, the health of the entire pension risk transfer industry, and the very retirees whose pension obligations are safeguarded through these transactions,” Dylan Tyson, president, Prudential retirement strategies, said in a statement. “The class action attorneys show no understanding of reinsurance but nonetheless make unsubstantiated and erroneous allegations. Although Prudential is not a party to the lawsuit, Prudential vehemently denies all allegations made against it in the complaint.”

The plaintiffs also allege that State Street, which was hired by Verizon as an independent fiduciary, “directly profited” from the PRT transaction through common stock holdings in Verizon, Prudential and RGA.

“State Street failed to act solely in the interests of the Plan Participants as required under ERISA,” the complaint alleges. “Rather, State Street’s own financial interests were improperly served by off-loading Verizon liabilities to [Prudential] and RGA, and by helping Verizon obtain the cheapest available annuity provider, as opposed to the ‘safest available’ annuity provider as required by ERISA.”

SSGA declined to comment on the lawsuit.

Verizon issued a statement that: “The lawsuit is completely without merit. Verizon will defend the matter vigorously.”

Dominic DeMatties, a partner in Thompson Hine LLP, which represents plan sponsors, did not comment directly on the Verizon lawsuit. But he did note via email that the decision as to whether to transfer pension assets and liabilities to insurance companies is made by the plan sponsor “in its settlor capacity,” which means the decision is not subject to fiduciary duties under the Employee Retirement Income Security Act and should not be treated as such. Only the selection of the insurance company or companies from which to purchase the contracts is subject to ERISA.

“These lawsuits, in which plaintiffs include no specific allegation of wrongdoing by the plan fiduciaries in connection with the pension risk transfer but instead allege more generally that a particular insurance company is risky and/or a particular independent fiduciary is conflicted, seem oddly aligned with recent political attacks on the general practice of transferring assets and liabilities from a defined benefit pension plan to an insurance company rather than addressing or remedying any specific harm or loss actually suffered by plan participants and beneficiaries as a result of the transaction,” DeMatties says.

Prudential’s Tyson said in a statement that “all of Prudential’s reinsurance transactions are structured and executed in full compliance with legal and regulatory requirements, under the robust oversight of our insurance regulators. Prudential is widely regarded as a safe and secure insurance company and diversified financial services organization, with exceptional financial strength and stability.”  

Previous PRT Complaint Against Verizon Reached Supreme Court

Through the PRT, Prudential and RGA each now assume about 50% of the transferred pension liabilities, except in some geographic areas where Prudential will take on 100% of the obligations.

In March 2024, shortly after the PRT was made public, the Association of BellTel Retirees Inc. called for renewed protections of Verizon retirees’ pension assets. The 134,000-member nonprofit advocacy group alleged that Prudential’s dependence on an Arizona-based reinsurance company hides some of its books and records and makes its group annuities less safe for retirees.

The association sued Verizon in 2012 to try and prevent an $8.4 billion transfer to Prudential of 41,000 retirees’ pension assets. In the lawsuit challenging the PRT’s legality, the plaintiffs received class action status. Appeals in the case eventually went to the U.S. Supreme Court, which remanded it back to the U.S. 5th Circuit Court of Appeals, where it was dismissed in 2016.

ERISA attorney DeMatties noted that, from the perspective of a plan sponsor, running a DB plan is an unrelated business in which it must engage and which it must manage. With that backdrop, the plaintiffs’ argument in many of these cases “seems to prefer that status quo indefinitely over having a pension plan run by a company whose core business is professionally managing assets in order to pay insurance benefits over an extended period of time—which is exactly what occurs under a traditional defined benefit plan.”

Whether these cases continue to be filed in 2025 will be “heavily dependent on whether any of these complaints survive the motion to dismiss stage,” DeMatties says.

Update: This story has been updated to include comment from Prudential.