Employer Groups Urge 4th Circuit to Reverse Decision on Lockheed Martin PRT Motion

A trio of employer advocacy groups filed an amicus brief urging the U.S. 4th Circuit Court of Appeals to reverse a district court decision in a complaint that challenges pension risk transfers.  

The U.S. Chamber of Commerce, the ERISA Industry Committee and the American Benefits Council argued that the plaintiffs’ allegations in Konya v. Lockheed Martin Corp. were “speculative” and that PRTs are permissible under the Employee Retirement Income Security Act.

In the original complaint, filed in U.S. District Court for the District of Maryland, the plaintiffs alleged that Lockheed Martin violated ERISA by transferring pension plans to a private annuity provider, Athene Annuity & Life Assurance Co. of New York. The complaint alleged that the transfer allows Lockheed to save money at the expense of the plaintiffs’ retirement safety. The complaint also alleged that Lockheed breached its fiduciary duties by choosing a risky annuity provider when other, safer options were available.

U.S. District Judge Brendan Hurson denied Lockheed’s motion to dismiss the case, and Lockheed appealed the dismissal to the 4th Circuit to address whether the plaintiffs have alleged sufficient injury under ERISA.

According to the amicus brief, engaging in a PRT is a “settlor” function and therefore not subject to ERISA’s fiduciary protections. Furthermore, the employer groups stated that in a PRT, “for retirees whose benefits were transferred, the source of their monthly benefits changes, but the amount of benefits does not.”

The brief continued by stating that in none of the recent flurry of PRT cases, including Konya, did the plaintiffs allege that they did not receive their monthly benefit; instead, plaintiffs have alleged that the annuity providers chosen by fiduciaries are suboptimal and might someday default.

Despite arguing that PRTs are fully compliant with ERISA, the employer groups’ brief stated that the flurry of litigation has affected their use, hurting retirees.

“While these lawsuits challenge PRTs that have not caused any concrete or certainly impending harm, the lawsuits themselves have a real chilling effect on these legally permissible transactions that allow plan sponsors to obtain certainty over their pension obligations,” the brief stated.

The brief also stated that the 4th Circuit has an opportunity to clarify standing requirements for claims seeking equitable relief.

“Each of these PRT cases claims, without offering evidence, that the transactions will increase the risk of participants losing benefits,” said Andy Banducci, a senior vice president for retirement and compensation policy at ERIC, in a statement. “But this mere inference is not evidence of an injury. If cases like these move forward, plan sponsors will have to divert precious resources toward more legal battles, leaving less for the retirement plans employees rely on for financial security. The court should take this crucial opportunity to protect both employers and employees from these speculative claims.”