Allowing it to do so will permit it to evade the dictates of the Employee Retirement Income Security Act (ERISA) and the protection afforded by the Pension Benefit Guaranty Corporation (PBGC), the group said in a lawsuit filed with the U.S. District Court for the Northern District of Texas.
The lawsuit charges that the transaction, affecting approximately 41,000 pension participants or beneficiaries, is not in compliance with standard termination procedures established under ERISA and by the PBGC for a defined benefit pension plan, and is unprecedented. “Verizon’s proposed transaction violates the controlling terms of the documents establishing and governing the Verizon Management Pension Plan, constitutes a breach of ERISA fiduciary requirements, violates ERISA’s prohibition on discriminatory and intentional interference with retirees rights under a pension plan and ERISA, and undermines Congressional intent to provide American pensioners with a uniform safety net under the auspices of the PBGC,” the complaint says.The pensioners allege in the filing that Verizon’s motivation to shed its pension obligations simply to improve its credit rating is evidenced in the letter sent to affected retirees by the phrase, “Prudential will assume responsibility for your pension benefit,” so as to allow “Verizon to better focus on the core mission of providing the best communications network around the world.” They also say Verizon is taking advantage of retirees least able to defend themselves, as the transaction does not include non-management retirees and former management retirees represented by unions.
Verizon announced in October it had entered an agreement to purchase an annuity contract with Prudential to cover certain pension obligations of management employees who had retired before 2010. A company spokesperson told PLANSPONSOR the transaction “ensures that these pension obligations remain in safe and trusted hands,” (see “Verizon Pension Buyout Benefits Business, Retirees”).
Soon after the Verizon announcement, the Pension Rights Center announced plans to ask Congress to take steps to put a temporary stop to pension buyouts and lump-sum offerings to give policymakers time to examine whether these strategies could result in sellouts of retirement security, (see “Pension Rights Center Wants Halt on De-Risking”).The Verizon pensioners complaint is here.