IBM Faces Complaint Over $14B in PRTs to Prudential

A former IBM employee has filed a complaint accusing the company of jeopardizing the retirement security of more than 132,000 former workers by offloading billions of dollars in pension obligations to an insurance subsidiary. 

The complaint, filed Friday in U.S. District Court for the District of Massachusetts, contends that IBM and its independent fiduciary partner, State Street Global Advisors, violated federal pension law when they selected Prudential Insurance Co. of America as the annuity provider in two pension risk transfers. 

IBM shifted pension responsibilities in two major transactions: a $16 billion transfer in September 2022 covering about 100,000 retirees and a $6 billion transfer in September 2024 covering another 32,000. 

Each deal moved retirees out of the protections of the federal Employee Retirement Income Security Act and the Pension Benefit Guaranty Corporation, a federal backstop that insures corporate pensions. Instead, the retirees became holders of group annuities issued by PICA. 

The complaint alleges that PICA is an “unsafe insurer” and that, therefore, IBM and SSGA acted imprudently in selecting PICA, which resembles arguments from previous PRT complaints. 

The lawsuit claims that IBM and State Street Global Advisors failed to follow ERISA’s strict requirements to select the “safest available” annuity provider. 

The complaint asks the court to order IBM to restore protections equivalent to those the retirees lost, including by funding a trust or backstop. It seeks damages equal to the difference between the cost of PICA annuities and what it would have cost to select “the safest annuity available.” 

In a statement, a Prudential spokesperson said, “Although Prudential is not a party to the lawsuit, Prudential vehemently denies the unsubstantiated and erroneous allegations made against it in the complaint. 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.”