Chief Judge Sidney A. Fitzwater of the U.S. District Court for the Northern District of Texas found the class consists of approximately 41,000 individuals with common issues of law and fact, which is too numerous for individual cases. He defined the class as, “All participants, beneficiaries and/or alternate payees of the Verizon Management Pension Plan whose benefit obligations were transferred from the Plan to a group annuity contract issued by The Prudential Insurance Company of America.” The two retirees who filed the lawsuit were named lead plaintiffs.
According to Fitzwater’s order, at issue in the case is:
- Whether any of the Verizon defendants ran afoul of Section 102(b) of the Employee Retirement Income Security Act (ERISA) (and regulations thereunder) requiring summary plan descriptions (SPDs) to disclose the circumstances that may result in a loss or reduction of benefits;
- Whether the Verizon defendants violated ERISA’s fiduciary duty requirements, including the requirements to act in accordance with plan documents, the duty of loyalty and impartiality, and to diversify plan investments; and
- Whether the Verizon defendants discriminated against the members of the class in violation of ERISA Section 510 because other plan participants were not transferred out of the plan to Prudential and they lost no federal rights and uniform federal protection.
In a previous decision refusing to stop the transfer of pension assets (see “Court Approves Verizon Pension Buyout”), Fitzwater opined that it is not likely the retirees would prevail in their lawsuit claiming that Verizon violated its fiduciary duties under ERISA by not disclosing in the plan's SPD that it retained the right to transfer retirees' accounts to an annuity. Fitzwater noted that the SPD is only required to explain current plan terms, not changes that may occur. While the document must notify participants of events that could result in a loss of benefits, Fitzwater said the retirees did not show the annuity transaction would result in a loss of benefits because the annuity contract will provide for payment of benefits in the same form as under the plan.
Fitzwater also pointed out that the pension plan provides that Verizon “reserves the unlimited right to amend, modify, suspend, terminate or partially terminate the plan at any time, at [its] discretion, with or without advance notice to participants.” The plan also does not restrict how Verizon provides benefits, provided that contributions, investment income, and the like are used exclusively for intended beneficiaries.
Furthermore, the court ruled that the fiduciary duty claim under ERISA fails “because it is not a fiduciary act to amend or terminate a pension plan.” Although there is a fiduciary obligation in selecting an appropriate annuity provider, the decision to amend a plan to purchase an annuity does not implicate a plan fiduciary’s duties, Fitzwater said.The case is Lee v. Verizon Communications Inc.