Alcoa Corp. Faces Lawsuit Over PRT Deal with Athene

Updated with correction.

Alcoa Corp. is the latest target of a lawsuit filed by Schlichter Bogard LLP, following a series of pension risk transfers the company conducted with Athene Annuity & Life Co. between 2018 and 2022. 

In Camire et al v. Alcoa USA Corp. et al, four Alcoa retirees of the Pension Plan for Certain Salaried Employees of Alcoa USA Corporation are suing the Pittsburgh-based company, accusing it of violating its duties under the Employee Retirement Income Security Act by selecting “a substantially riskier insurer than numerous other traditional annuity providers,” according to the lawsuit filed on April 12 in the U.S. District Court for the District of Columbia. 

Attorney Jerome Schlichter filed similar suits against AT&T Inc. and Lockheed Martin in the past few months, both accusing Athene of being an “unsafe” insurer. Verizon Communications Inc. also received criticism after completing a pension risk transfer with Prudential Insurance Co. of America and RGA Reinsurance Co.  

Alcoa is a publicly traded aluminum producer that, as of December 31, 2023, employed approximately 13,600 employees in 17 countries worldwide. As of that same date, the company recorded $10.55 billion in net revenue.  

Through four separate transactions between 2018 and 2022, Alcoa offloaded more than $2 billion of the company’s pension obligations to Athene, which affected more than 28,000 retirees and their beneficiaries.  

The lawsuit accuses Athene of investing assets in such a way that selecting the firm may have cost Alcoa less than if it has selected another provider. The suit also said the insurer “invests in lower-quality, higher-risk assets without the traditional mix of quality assets to support future benefit obligations, posing a significant risk at a great cost to retirees.” 

“Because the market accounts for such risk when pricing investments, it is likely that Alcoa defendants saved a substantial amount of money by selecting a group annuity contract from Athene over the safest annuity available,” the lawsuit stated. “In transferring plaintiffs’ pension benefits to Athene, defendants put Alcoa’s retirees’ and their beneficiaries’ future retirement benefits at substantial risk of default—a risk which devalued their pensions without proper compensation.” 

The lawsuit states that Athene is one of the leading providers in the PRT market, having completed at least 45 transactions totaling $50.5 billion and covering more than 550,000 participants. Athene has previously rejected claims from a 2022 analysis by NISA Investment Advisors accusing the insurer of being perceived by investors as riskier than other providers.  

A spokesperson from Athene said, “These are baseless complaints instigated by class action attorneys who are attempting to enrich themselves at the expense of retirees. Athene is a safe and secure provider of annuity benefits, with outstanding financial strength, proper reserves, excellent capitalization, and strong credit ratings. Pension group annuities provide many protections that enhance retirement security. Insurers like Athene have deep expertise in managing annuity obligations, are subject to robust regulation, and hold regulatory capital to protect policyholders.” 

The Alcoa retirees also included in the litigation Fiduciary Counselors Inc., an investment consulting firm, that served as Alcoa’s independent fiduciary for the PRT transactions.  

To remedy the “fiduciary breaches,” the participants are looking to obtain disgorgement of the sums involved in the “improper transactions” and the posting of security to assure receipt of participants’ full retirement benefits.  

In response to a request for comment, an Alcoa spokesperson said the company “does not comment on pending litigation.”