Updated with correction
Verizon Communications Inc. management retirees filed a federal lawsuit Tuesday seeking to halt the pension buyout deal Verizon purchased from Prudential Insurance Co. of America.
The lawsuit, filed in U.S. District Court in Dallas, said the pension annuity deal violates ERISA law. Retirees claim the annuity contract “wipes out the federally insured pension safety net provided by the Pension Benefit Guaranty Corp.,” according to a news release from the Association of BellTel Retirees, an advocate group for retirees from six companies, including Verizon.
The PBGC protection would be replaced with varying coverage that is determined by the retiree's state of residence if Prudential were to default or experience an asset shortfall. The range goes from a low of $100,000 lifetime cap in eight states to a high of $500,000 in four states.
New York-based Verizon purchased a group annuity contract from Prudential in October to transfer $7.5 billion in pension obligations, about 25% of the company's overall pension liabilities.
Randal S. Milch, executive vice president and general counsel at Verizon, said in an e-mail that the “lawsuit is without merit” and that the pension benefits received from Prudential will not change for retirees.
“Prudential is providing an irrevocable commitment to make all future annuity payments, and this promise will be supported by the extra protection of assets being placed in a separate account at Prudential dedicated to Verizon retirees,” Mr. Milch said.
“Prudential has a long history of providing group annuity benefits and already provides pension plan services to 3.7 million workers and retirees nationwide. An independent fiduciary conducted an extensive review of the insurance market and annuity providers and selected Prudential as the annuity provider, with the safety and protection of pension plan participants being the sole consideration.”