Association of BellTel Retirees Points to Red Flags in Verizon PRT Deal

In response to last week’s announcement that Verizon Communications Inc. completed a $5.9 billion pension risk transfer to Prudential Insurance Co. and RGA Reinsurance Co., leaders of the Association of BellTel Retirees are calling for renewed protection of Verizon retirees’ pension assets. 

Verizon purchased a single-premium group annuity contract for 56,000 retirees and their beneficiaries, all of whom retired prior to January 1, 2023. The third-party pension annuity transfer payments are set to begin July 1, 2024. 

The Association of BellTel Retirees, a 134,000-member non-profit advocacy group, is now arguing that Verizon’s deal raises red flags. Edward Stone, special counsel to the association and executive director of the non-profit Retirees for Justice, wrote in a statement that Prudential Insurance Company of America is “heavily dependent” on Arizona-based captive reinsurance companies that “do not file publicly available financial statements under Statutory Accounting Principles.” 

“Arizona is a ‘regulation light’ jurisdiction where reinsurance captives are allowed to maintain secret books and records,” Stone stated. “Given how much retirees lose in these pension risk transfer deals, it’s a shame that companies like Verizon cannot be more transparent and accountable when it comes to retirees and their livelihoods.”  

Prudential did not respond to a request for comment.  

The association previously sued Verizon in 2012 to prevent the telecom provider’s $8.4 billion transfer to Prudential of 41,000 retiree’s pension assets. The lawsuit challenging PRT’s legality grew into a class-action case and rose to the U.S. Supreme Court. That case was ultimately dismissed by the U.S. Circuit Court of Appeals in 2016, after the Supreme Court had remanded it there for a rehearing.  

When asked if the association plans to bring another lawsuit against Verizon, BellTel Board Chairman Thomas Steed told PLANSPONSOR that they “have something in the strategy bag” that the association is working on. Steed did not provide additional details. 

Since the 2012 PRT, more than $300 billion in retiree assets have been offloaded to insurance annuity providers and private equity investors by American corporations, according to the association. Retirees asserted that Verizon has now collectively expelled 97,000 defined benefit pensioners from the “safety of the company’s pension umbrella” for a total exceeding $14.3 billion. 

Association Secretary Donald Kaufmann recently provided testimony to the Department of Labor ERISA Advisory Council at the IB 95-1 hearing in July 2023. IB 95-1 describes the fiduciary standards for selecting an annuity provider for a PRT, and Kaufmann argued for making changes to current rules in order to “put the teeth back into ERISA.”  

The SECURE 2.0 Act of 2022 required the DOL to review IB 95-1 and recommend possible modifications to Congress by the end of 2023, but modifications have yet to be released. 

Kaufmann, in his testimony, argued that PRTs should be approved by an independent agency to ensure the financial strength of the insurance company and that the company has the adequate reserves to manage the pension payments. 

Kaufmann argued that with group annuity contracts governed by individual state laws, as in the Verizon deal, retirees are “no longer under ERISA’s uniform federal protections” and it become the responsibility of Prudential to provide the retirees’ pension benefits.  

“I think the key is that most people think if that you lose ERISA, you haven’t lost anything if an insurance company is taking over the payment, but we think things are lost, and the average retiree might not be aware of that,” Kaufmann said.  

Just this week, AT&T Inc. and Lockheed Martin Corp. were sued over pension risk transfers they completed in recent years with Athene Annuity and Life Co., which plaintiffs have accused of being a “risky” insurance company for handling pension liabilities.