Compliance April 2, 2025

PRT Lawsuits Get Split Rulings in District Courts

A lawsuit against Lockheed Martin over pension risk transfers it conducted with Athene will continue, whereas a similar lawsuit against Alcoa Corp. was dismissed.

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District courts issued contrasting opinions on lawsuits against companies for conducting pension risk transfers with insurance company Athene Holding Ltd. or its subsidiaries.

Lockheed Martin Corp.’s motion to dismiss a lawsuit related to two PRTs it conducted with Athene, in 2021 and 2022, was denied by the U.S. District Court for the District of Maryland on Friday. Meanwhile, a lawsuit against Alcoa Corp., also regarding PRTs it conducted with Athene, was dismissed by the U.S. District Court for the District of Columbia on Friday.

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Schlichter Bogard LLP represents the plaintiffs in both cases.

Lockheed Martin

Lockheed Martin transferred its pension liabilities to Athene Annuity and Life Co. and Athene Annuity & Life Assurance Co. of New York on two occasions: on August 3, 2021, when the company transferred $4.9 billion in pension obligations and plan assets for 18,000 beneficiaries, and again on June 27, 2022, when it transferred an additional $4.3 billion in obligations for 13,600 beneficiaries.

The plaintiffs in Konya et al. v. Lockheed Martin, participants in the company’s plan, alleged that Lockheed retained Athene as the annuity provider “in violation of their strict fiduciary responsibilities … [because] Athene was not the safest available option.”

Several of the PRT lawsuits involving Athene, including the one against Alcoa Corp., accuse the insurer of investing in “lower-quality, higher-risk assets” and having “questionable creditworthiness,” posing a risk to retirees. Athene is not named in any of the lawsuits.

In a motion to dismiss, Lockheed argued that the plaintiffs lacked Article III standing and could not point to any concrete, imminent injury that they have suffered as a result of the PRTs. Lockheed also characterized the plaintiffs’ harm as an “inchoate fear” unsupported by adequate facts, but U.S. District Judge Brendan Hurson wrote that the plaintiffs pointed to the collapse of Executive Life Insurance Co. in the early 1990s, which shows the “very real possibility” that Athene’s allegedly high-risk insurance practices pose an imminent harm to retirees.

“The court believes that at this early stage, plaintiffs have adequately alleged facts, if only barely so, sufficient to conclude there is ‘a substantially increased risk’ that Athene will fail and plaintiffs will suffer harm because of it,” Hurson’s opinion stated.

The plaintiffs requested relief by disgorging the sums involved in the “improper transactions,” which the court found would serve their ability to receive their vested retirement benefits. As a result, the court found that the plaintiffs showed sufficient injury-in-fact to establish standing.

The court also noted that while it is rejecting Lockheed’s injury-related challenge at this early stage, subject matter jurisdiction may be challenged “at any time.”

Alcoa Corp. Case

In Camire et al. v. Alcoa USA Corp., et al., the U.S. District Court for the District of Columbia found that the plaintiffs’ monthly annuity payments have not been affected by the PRT transactions with Athene, and they did not suffer actual harm that would confer standing.

“Plaintiffs cannot escape the requirement to show that they have suffered an actual harm by framing their claim as a violation of contractual rights; they must still show that the transfer of their contractual rights concretely harmed them in some way,” U.S. District Judge Loren Alikhan’s opinion stated.

A spokesperson from Athene commented, “As we have consistently maintained, these are frivolous claims without merit, driven by predatory trial lawyers targeting the pension risk transfer industry as a whole. We believe that the court in Alcoa got it right – that the plaintiffs’ claims have no merit. A judge in a separate decision repeatedly called into question whether the plaintiffs would ultimately succeed on their claims. Independent insurance experts recognize the facts: Athene is a safe and secure annuity provider with a fortress balance sheet with $31 billion of regulatory capital and strong credit ratings.”

Lockheed Martin and Alcoa Corp. did not immediately respond to requests for comment.

Earlier this year, the ERISA Industry Committee, American Benefits Council and the Committee on Investment of Employee Benefit Assets Inc. filed an amicus brief, encouraging the dismissal of a similar lawsuit against Bristol-Myers Squibb Co. over a PRT it conducted in 2019 with Athene.

The industry groups argued that the plaintiffs lack standing and the continuation of the case threatens a “surge in frivolous litigation.”

The case against Bristol-Myers Squibb is still ongoing, and many industry groups continue to file amicus briefs in support of the company’s motion to dismiss.

The Markets April 2, 2025

Popularity of No-Load Mutual Funds Whittles Down Fees

Expense ratios for mutual funds and ETFs have plunged over the past 28 years, per an ICI report.

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Thanks to the popularity of no-load funds, the average expense ratio for mutual funds has been steadily declining over the past three decades, per a report from the Investment Company Institute.

According to ICI’s “Trends in the Expenses and Fees of Funds,” between 1996 and 2024, the average expense ratio for equity and bond mutual funds dropped 62% and 55%, respectively. During that time, U.S. gross sales of long-term mutual funds without 12b-1 fees doubled to 92% in 2024 from 46% in 2000. Additionally, between 2011 and 2025, the share of assets in index mutual funds and exchange-traded funds surged to 51% of all long-term mutual fund net assets, up from 19%.

“Retail investors in the U.S. save considerable money over the course of their investing lives thanks to a vibrant and competitive fund market,” said Shane Worner, the ICI’s senior director of industry and financial analysis, in a statement.

During 2024, the average expense ratio for equity mutual funds declined three basis points to 0.40%, while bond mutual funds’ average expense ratio edged one basis point higher to 0.38%. The average expense ratio for index equity ETFs fell two basis points to 0.14%, and the average expense ratio for index bond ETFs was down one basis point to 0.10%.

According to ICI research, the expense ratios for mutual funds often depend on what kind of fund it is. Money market mutual funds and bond funds tend to have lower expense ratios than equity and hybrid mutual funds, for example. Within equity mutual funds, global funds and sector funds—such as tech, energy and health care—tend to have higher expense ratios because they typically cost more to manage.

Fund size and asset growth also factor into expense fees. For example, fund costs such as transfer agency fees, accounting fees, audit fees and director fees are essentially fixed in dollar terms, according to the report. “As a result, when fund assets rise, these relatively fixed costs make up a smaller proportion of a fund’s expense ratio,” the report stated.  

Expense ratios can also can vary widely within a fund’s objective. For instance, ICI research found that 10% of equity mutual funds focusing on growth stocks have expense ratios of 0.59% or less, while another 10% have expense ratios at least three times that at 1.77% or greater.

As of the end of 2024, sector equity mutual funds had the highest average asset-weighted expense ratio at 0.68%, with high-yield bond mutual funds next at 0.60%. They were followed by hybrid mutual funds and growth equity mutual funds at 0.58% each. Meanwhile, index equity mutual funds had the lowest average asset-weighted expense ratio at 0.05%, followed by money market mutual funds and blended equity mutual funds at 0.22% and 0.23%, respectively.

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