AT&T Faces 2nd Lawsuit Over PRT Deal; Utility Motion to Dismiss Rejected

Two separate ERISA lawsuits, with plaintiffs in both cases represented by attorney Jerome Schlichter of Schlichter Bogard LLP, have advanced over the past week against AT&T Inc. and utility company PPL Corp. 

The new lawsuit by former participants against AT&T comes just a few days after four other former participants, represented by law firm Libby Hoopes Brooks & Mulvey PC, sued the telecom company because of its decision, along with its independent fiduciary, State Street Global Advisors Trust Co., to conduct an $8.05 billion pension risk transfer with Athene Annuity and Life Co. in May 2023. 

The PRT involved AT&T offloading 96,000 of its plan participants to Athene. The lawsuit accused Athene of being a “risky new insurance company” dependent on its Bermuda-based subsidiary and with an asset base “far riskier than AT&T’s.” 

Three additional former participants of the AT&T Pension Benefit Plan—Catherine Schloss, Patricia Tate-Jackson and Darlene Wilson—filed a complaint against AT&T and State Street, similarly accusing the companies of violating their ERISA obligation to obtain the “safest annuity available.” 

The retirees claim that in selecting Athene, AT&T and State Street “favored their own interests over those of the plan participants,” arguing that Athene structured its annuities to generate higher expected returns at a cost to retirees and their beneficiaries.  

As did the prior lawsuit, the retirees cite a 2022 analysis from NISA Investment Advisors that ranked Athene as a “questionable candidate” as an annuity provider due to credit risk.  

“By transferring [the retirees’] pension benefits to Athene, [AT&T and State Street] put retirees’ and their beneficiaries’ future retirement benefits at substantial risk of default—a risk for which they were not compensated, and which devalued their pensions,” the complaint states. 

The retirees are seeking to obtain relief for AT&T’s ERISA violations, including “disgorgement of the sums involved in the improper transactions” to ensure the participants of their full retirement benefits.  

A spokesperson for AT&T told PLANSPONSOR, “We deny the allegations, and we will defend ourselves in court.” 

PPL Lawsuit Continues, With Narrower Scope 

Schlicter Bogard is also representing current and former participants in a lawsuit, initially filed in 2022, against PPL, claiming the company violated ERISA by including underperforming target-date funds in four of PPL’s retirement plans.  

U.S. District Judge Mia Roberts Perez denied PPL’s motion to dismiss Binder et al. v. PPL Corp. et al. in U.S. District Court for the Eastern District of Pennsylvania on March 12, but she also limited the plaintiffs’ case.  

PPL selected Northern Trust Focus Funds as the plan’s TDF investment option in 2013, and the plaintiffs alleged that, since their inception, the Focus Funds consistently underperformed alternative funds. 

Perez denied PPL’s motion but also stated that the plaintiffs’ claims are limited to “breaches that occurred from January 12, 2016 and thereafter.” As a result, “Defendants’ 2013 selection of the Focus Funds may not constitute a breach in itself, and the Court will disregard allegations that suggest the opposite.” 

Northern Trust was not named as a defendant in the lawsuit.  

The plaintiffs also claim that from 2016 to 2020, PPL selected and caused the plan to pay higher-cost shares of the Focus Funds when “identical, lower-cost shares were available.” The participants cited similar TDFs from TIAA, T. Rowe Price and Vanguard to demonstrate the poor performance of Northern Trust’s funds. PPL argued the plaintiffs had failed to create a “meaningful benchmark.

Perez sided with the plaintiffs on this point, stating that PPL’s argument in the motion to dismiss was “misplaced.”  

The plans named in the suit include the PPL Employee Savings Plan, PPL Deferred Savings Plan, PPL Employee Stock Ownership Plan and the LG&E and KU Savings Plan, all overseen by the same fiduciaries.  

Neither PPL nor Schlichter responded to requests for comment.