Verizon retirees fail to halt pension annuity deal with Prudential
By Kevin Olsen | December 7, 2012 2:14 pm
A U.S. District Court judge in Dallas on Friday denied issuing a preliminary injunction to block a pension annuity transaction by Verizon Communications Inc. with Prudential Insurance Co. of America.
Verizon management retirees filed a lawsuit Nov. 27 claiming the pension annuity deal violates ERISA and would eliminate the pension safety net provided by the Pension Benefit Guaranty Corp.
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. The transaction is expected to close Dec. 10.
Judge Sidney A. Fitzwater said in his court opinion that the plaintiffs did not establish a substantial likelihood that they will prevail on the merits of the case.
Plaintiffs claimed Verizon violated ERISA by not disclosing in the summary plan description its right to transfer pension obligations to an insurance company. Mr. Fitzwater contended the summary plan description requires a description of the plan's current terms and not a disclosure that changes might occur. He added plaintiffs did not prove the transaction would result in a loss of benefits since the annuity contract provides identical benefits.
The summary plan description also states 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,” Mr. Fitzwater wrote, quoting the SPD in his ruling.
The judge also struck down the complaint that the annuity purchase violates Verizon's fiduciary duty. Mr. Fitzwater said the act to amend or terminate a pension plan is not a fiduciary act, which encompasses management and administration of the plan, but not plan design.
Verizon spokesman Raymond McConville said the company is “pleased by the court's decision.”
Curtis L. Kennedy, attorney for the retirees, said the ruling was not a surprise and will be appealed. In a telephone interview, he said the “case has to be challenged on behalf of all corporate America retirees” who face the risk of pension guarantees being taken away.