Bristol-Myers Squibb, State Street Targeted in Lawsuit Over PRT

Bristol-Myers Squibb Co. and its independent fiduciary State Street Global Advisors Trust Co. are facing a lawsuit over a $2 billion pension risk transfer the pharmaceutical company completed in 2019 with Athene Annuity and Life Company.

The lawsuit, Charles Doherty v. Bristol-Myers Squibb Co. et al., was filed in the U.S. District Court of the Southern District of New York on Tuesday by former Bristol Myers employee Charles Doherty, who is being represented by law firms Edward Stone Law P.C. and Zuckerman Spaeder LLP.

Edward Stone is also the executive director of Retirees for Justice Inc. and the legal counsel for the Association of BellTel Retirees.

Several large companies have been sued in recent months over completing pension risk transfers with Athene, as plaintiffs continue to claim that the insurance company is “highly risky” and that employers are not selecting the “safest available insurer,” therefore violating ERISA.

The Department of Labor issued a report on Interpretative Bulletin 95-1 in June, noting issues within the pension risk transfer marketplace, such as the role of private equity ownership, offshore re-insurance and riskier investment profiles, among others. However, the report did not recommend any policy changes or designate any issues as being particularly concerning.

Some examples of recent lawsuits include filings against General Electric Co., Alcoa Corp. and Lockheed Martin Corp. Plaintiffs in all of these cases were represented by Schlichter Bogard LLP.

In the Bristol-Myers case, the plaintiff alleged that the company stood to gain from the pension risk transfer deal by paying less than it would have with “safer” .

“The only losers in the transaction were Bristol-Myers’ retirees, who face the danger—now and in the future—that their lifetime pensions will go unpaid while they have lost all the protections of federal law,” the lawsuit alleged.

In 2019, the pharmaceutical company purchased group annuity contracts from two Athene Holdings subsidiaries, transferring $2.6 billion in pension liabilities for about 24,000 participants. Bristol Myers announced in December 2018 that it would terminate the plan in February 2019.

The lawsuit claimed that Athene should “not be trusted with the retirement income of many thousands of Americans,” accusing them of engaging in the “dicey shadow banking sector.” Despite the alleged risks associated with Athene as an insurer, the Bristol-Myers pension committee selected Athene as the annuity provider because “Athene’s annuities are cheaper than the safer alternatives provided by traditional insurers,” the lawsuit alleged.

Bristol-Myers was also accused of having an “acute incentive” to purchase a cheaper annuity because 2019 was a relatively low interest rate environment, which meant that annuity prices were relatively high.

Bristol-Myers and State Street and did not respond immediately to requests for comment. Athene, which was not named as a defendant in the lawsuit, responded via a spokesperson.

 “This is a frivolous complaint instigated by class action attorneys who are aiming to line their pockets at the expense of retirees,” the spokesperson wrote via email “Athene, which AM Best recently upgraded to A+, is a safe and secure provider of annuity benefits, with outstanding financial strength, proper reserves, excellent capitalization, and strong credit ratings. Every Athene pension group annuity transaction has followed rigorous review by fiduciaries and their independent experts tasked with examining insurer safety. Every pension group annuity participant has received and will receive every promised benefit.”

As a result of the pension risk transfer, the lawsuit alleged that Bristol-Myers and State Street have caused “massive financial injury” to retirees because their retirement benefits are no longer covered by ERISA or protected by the Pension Benefit Guaranty Corporation, and instead depend on Athene’s solvency.

The plaintiff seeks injunctive relief requiring Bristol-Myers to guarantee the retirement benefits that were part of the workers’ employment bargain with the company and which those workers earned through their service at the company. In addition, the plaintiff seeks monetary relief from Bristol-Myers and State Street including the profit the companies earned from the transaction and losses resulting from their “illegal conduct.”