Former DOL Officials, Industry Groups, Back Lockheed PRT Plaintiffs

Two former Department of Labor officials and several industry groups filed amicus briefs opposing the DOL’s position in favor of employer Lockheed Martin, instead supporting employees in a pension risk transfer appeal.

The DOL recently filed an amicus brief in Konya v. Lockheed Martin Corp., arguing that the plaintiffs lacked standing because they continued to receive their full promised benefits after Lockheed Martin transferred its responsibility to make pension payments to an annuity provider.

But the group that responded to the DOL briefs took a different approach, stating that the DOL’s view runs counter to that intended by Congress in passing the Employee Retirement Income Security Act.

“Adopting the Secretary [of Labor]’s position would undermine Congress’s intent in enacting ERISA’s fiduciary standards and remedial scheme by insulating fiduciary conduct from review precisely when judicial oversight is most needed,” wrote Phyllis Borzi, who was head of the Employee Benefits Security Administration during former President Barack Obama’s term, and Ali Khawar, who was assistant EBSA secretary under former President Joe Biden, in a brief filed in the U.S. 4th Circuit Court of Appeals.

AARP and the AARP Foundation; the Pension Rights Center; and the National Retiree Legislative Network joined in filing similar briefs arguing in favor of the plaintiffs.

Lockheed completed two pension risk transfers with Athene Annuity and Life Co. and Athene Annuity & Life Assurance Co. of New York: In 2021, the company transferred $4.9 billion in pension obligations and plan assets for 18,000 beneficiaries; and in 2022, it transferred an additional $4.3 billion in obligations for 13,600 beneficiaries.

Though the DOL argued in its filing that the plaintiffs continue to receive benefits following the PRT, the former DOL officials argued that insisting the plaintiffs lacked standing would disrupt the balance of ERISA and that the PRT substantially increased the risk of nonpayment of benefits, thereby giving the plaintiffs standing in the case.

“The balance is not served by a rule that denies any judicial forum for alleged fiduciary misconduct in annuity-provider selection unless plaintiffs can plead something close to inevitable nonpayment,” the former officials wrote. “Such a rule would reduce deterrence of imprudent or disloyal selection practices and could undermine confidence in plan administration—particularly in transactions that shift the payment obligation to an insurer for decades.”

The Lockheed appeal gives the 4th Circuit (which hears appeals from Maryland, North Carolina, South Carolina, Virginia and West Virginia) an opportunity to become the first federal appeals court to address a wave of lawsuits targeting employers that transferred pension risk by purchasing annuities from annuity providers.

A judge in U.S. District Court for the District of Maryland denied Lockheed’s original motion to dismiss, allowing discovery to proceed, but the appellate court agreed to hear an interlocutory appeal on the standing issue.

Brown, Goldstein & Levy LLP served as counsel for Borzi and Khawar, according to the filing.