Compliance June 7, 2024

AT&T Seeks Dismissal From Two Lawsuits Targeting PRT Deal with Athene

The telecommunications company argued that allegations that it failed in its fiduciary duties are misplaced and should fall to its independent fiduciary, SSGA.

Reported by

AT&T Inc. filed a motion to dismiss two lawsuits against the company Wednesday that accused both AT&T and its independent fiduciary, State Street Global Advisors Trust Co., of selecting a “risky” third-party insurance company—Athene Annuity and Life Company—to conduct its $8.05 billion pension risk transfer in May 2023. 

The retirees who filed the two lawsuits against AT&T claimed that selecting Athene was not a safe annuity choice for ERISA fiduciaries. But the company’s filing argued that AT&T did not make that fiduciary decision, SSGA did.  

Get more!  Sign up for PLANSPONSOR newsletters.

The first lawsuit, Piercy et al v. AT&T Inc. et al, was filed on March 11 in the U.S. District Court for the District of Massachusetts—the plaintiffs are represented by law firm Libby Hoopes Brooks & Mulvey PC. The second lawsuit was filed a week later by three additional former participants of the plan, represented by attorney Jerome Schlichter of Shlichter Bogard LLP. 

The telecommunications company stated in the motion that the Employee Retirement Income Security Act protects the ability of defined benefit pension plan sponsors like AT&T to annuitize pension risk. In addition, the firm argued that the decision to purchase an annuity is a “settlor decision” that is “unassailable under ERISA’s fiduciary requirements.” 

“AT&T’s decision to proceed with annuitization was not a fiduciary decision, and thus AT&T couldn’t have breached any ERISA fiduciary duties in making that decision,” the memorandum stated.  

SSGA—an independent, financial institution with expertise in PRTs—was specifically hired for the purpose of selecting an annuity provider, and AT&T argued that it is not subject to fiduciary liability for a decision it did not make.  

In addition, AT&T argued that the retirees cannot, and do not, allege that they have been denied “even a penny” of their pension benefits to date, or that the terms of the annuities are insufficient to fulfill their pension benefits.  

“While plaintiffs allege that Athene might default on its obligations at some unknown point in the future if it does a poor job of managing its assets, this allegation is far too speculative to give rise to Article III standing,” the memorandum further stated. “To establish a case or controversy under Article III, Plaintiffs must allege an imminent threat of harm, and none of plaintiffs’ allegations, either individually or in the aggregate, comes close to meeting that requirement.” 

Arguing that the retirees’ complaints are “missing the critical ingredients of harm and liability,” the company believes the claims against it should be dismissed. 

SSGA did not immediately respond to request for comment on the memorandum.  

The PRT deal involved AT&T offloading the pensions of 96,000 of its plan participants to Athene. 

Benefits June 7, 2024

146 PRT Contracts Were Sold in Q1

The contracts, totaling $14.6 billion in premiums, represent a 26% increase from Q1 2023 and an all-time record, LIMRA reports.

Reported by

The rise in pension risk transfer transactions in the U.S. shows no sign of stopping. In the first quarter of this year, single-premium PRT sales reached $14.6 billion across 146 contracts, according to insurance research organization LIMRA, which published the data Thursday in its U.S. group annuity risk transfer sales survey.

The value of Q1 transactions exceeded those in the first quarter of 2023 by 130%, and the number of contracts sold rose 26%, the survey found. The contracts sold in the first quarter covered 200,000 corporate pension plan participants.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“Demand for PRT solutions continues as favorable economic conditions spur plan sponsors to de-risk their pension obligations,” said Keith Golembiewski, head of LIMRA Annuity Research, in a press release. “While there were a few jumbo deals driving the remarkable premium growth, the number of contracts sold was the highest first-quarter results seen since LIMRA has been tracking sales, signaling broad plan sponsor interest.”

Single-premium buy-outs—i.e., where the plan sponsor transfers the plan to an insurer—reached $14.2 billion in the first quarter, across 144 contracts. LIMRA recorded only two buy-in transactions—i.e., where the sponsor continues to run the plan, but the insurer holds the risk—valued at $435.6 million collectively.

In a separate report, Legal & General Retirement America, the PRT wing of U.K. asset manager Legal & General, also recorded an estimated $15 billion in pension risk transfer premiums closed in the first quarter.

LIMRA’s Golembiewski wrote that his organization expects the PRT momentum to continue throughout this year. A number of large transactions have already occurred, such as oil giant Shell’s $4.9 billion PRT with Prudential Financial, power company Entergy’s $1.2 billion transaction with MetLife, and telecom provider Verizon’s $5.9 billion pension transfer with Prudential and RGA Reinsurance.

As higher interest rates have elevated many plans’ funded status, and in some cases created a funding surplus in corporate pension plans, increasingly plan sponsors are considering moving their pension liabilities from their balance sheet and offloading them to an annuity provider.

According to data from consultancy Milliman, nearly half of the largest 100 U.S. corporate defined benefit plans are in a funding surplus, and none of them have a funded status of less than 75%.

«