(Bloomberg) — Verizon Communications Inc. pension-plan beneficiaries lost a bid to block the company’s transfer of $7.5 billion in plan obligations to Prudential Insurance Co. of America.
U.S. District Judge Sidney A. Fitzwater in Dallas this month denied a request by two retirees who worked for a Verizon predecessor to issue an order stopping the deal, saying they failed to show a “substantial likelihood of success on the merits” of their case.
The transaction, under which the retired managers’ plan would be converted to an annuity, would strip them and about 41,000 other beneficiaries of the protections of federal law and cause irreparable harm, they said in lawsuit filed Nov. 27.
“Plaintiffs have failed to establish a substantial likelihood that Verizon has a specific intent to interfere with their rights,” Fitzwater wrote in his opinion. “They do not offer a rebuttal to Verizon’s proffered legitimate, nondiscriminatory reasons for defining the group of retirees for the annuity contract.”
Verizon, the second-largest U.S. phone company, said on Oct. 17 that it planned to shift about one-fourth of its pension obligations to Prudential to remove risk from its balance sheet. The New York-based company has said the beneficiaries’ lawsuit is without merit and it may be harmed if the transaction isn’t completed by this week.
“Verizon’s actions regarding its pensions protect the interests of our retired management employees,” the company said in a Nov. 29 statement. “The monthly pension benefits of the retirees receiving an annuity from Prudential will remain unchanged.”
The unit of Prudential Financial Inc., the second-largest U.S. life insurance company, is also a defendant in the suit. In a Dec. 5 filing, the Newark, New Jersey-based company told Fitzwater the plaintiffs’ pensions will remain safe and urged him to reject their request to block the transfer.
“Prudential has paid retiree benefits under group annuity contracts and other arrangements since 1928 without interruption,” according to the filing.
The case is Lee v. Verizon Communications Inc., 12-cv-4834, U.S. District Court, Northern District of Texas (Dallas).
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1 Comment
Posted by: Ron D | December 17, 2012 10:52 AM
Here we go. Look for more and more companies to follow suit to limit their pension liabilities. The court did not buy into the future harm to pensioners claim. In fact, who is to say that Prudential does not offer a safer option for retirees, albeit without any prospect for cost of living adjustments. My former employer had not a ever provided retired managers with any type of COLA adjustment. they have also had serious financial problems which raised the prospect that they would have to transfer the pension assets to the federal government. Under that scenario, my "guaranteed" pension, would have been severely reduced due to my early retirement age. At the earliest point of my retirement, I would have only received about 25% actual pension if the federal government had taken over our plan. So, for retirees like me, the annuity could be an attractive option. However, I under the the fear of many after living through the financial collapse of major insurers only a few years ago.
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