FirstEnergy Completes $700M Pension Risk Transfer

FirstEnergy Corp., one of the nation’s largest investor-owned energy utilities, entered into a $700 million pension risk transfer transaction with Legal & General Retirement America and Reinsurance Group of America Inc., the insurers announced Thursday.

The retiree lift-out was completed in December 2023 and covers about 2,200 retirees—representing about 8% of the total pension liability associated with its former power generation subsidiaries, according to a press release.

LGRA, a division of Banner Life Insurance Co., is the lead administrator and will be fully responsible for the service to and administration of all participant accounts transferred as part of the PRT deal. Aon and K&L Gates also advised FirstEnergy on the transaction.

“Partnering with RGA enables us to deliver a unique risk-management solution to FirstEnergy and its annuitants that is backed by the financial strength and experience of two leading insurance companies,” said George Palms, president of LGRA, in a statement. “We take great pride in our level of dedicated customer service and through this transition, and we look forward to servicing and protecting the retirement income for these participants.”

According to FirstEnergy, impacted retirees were notified of the change in January and will be contacted by Banner Life this month. Banner Life began as the administrator of the benefits and the primary point of contact for annuity payment questions on March 5.

FirstEnergy stated that the value of a retiree’s pension benefit will not be affected by the transaction, and monthly payments will continue automatically and uninterrupted based on the current direct deposit or paper check payment method.

LGRA and RGA also conducted a $309 million PRT with PPG Industries Inc. in June 2023, which covered more than 4,000 retirees at the Pittsburgh-based Fortune 500 company.

Verizon Communications Inc. also completed a $5.9 billion pension risk transfer this month by purchasing single-premium group annuity contracts with two insurers covering 56,000 retirees. The group annuities were provided by Prudential Insurance Co. of America and RGA.

Lockheed Martin PRT Lawsuit

In other news related to pension risk transfers, following a lawsuit filed earlier this week against AT&T over its $8.05 billion 2023 PRT with Athene Annuity and Life Co., the Lockheed Martin Corp. is the newest target in a class action complaint for two PRTs it conducted in 2021 and 2022, also with Athene.

The first Lockheed PRT occurred on August 3, 2021, when the company announced the transfer of approximately $4.9 billion of its gross pension obligations and related plan assets for around 18,000 U.S. retirees and beneficiaries to Athene. On June 27, 2022, Lockheed announced another PRT with Athene, this time of approximately $4.3 billion for another 13,600 retirees.

The complaint, filed on Wednesday in U.S. District Court for the District of Maryland by four former participants of Lockheed’s Salaried Employee Retirement Program and the Aerospace Hourly Pension Plan, claims Lockheed violated its fiduciary responsibilities by selecting Athene as its insurer for 31,000 retirees’ pension benefits.

As in the AT&T case, the plaintiffs accuse of Athene being “substantially riskier than numerous traditional annuity providers” and cite a 2022 NISA Investment Advisors report that ranked Athene as a “questionable candidate” for creditworthiness.

The retirees in the Lockheed Martin complaint are represented by Darby Law Group LLC and Schlichter Bogard LLP and are seeking disgorgement of all sums derived from the “improper transactions,” as well as security to assure participants will receive all retirement benefits covered by Athene.

Athene, which is not a named party in the lawsuit, did respond to a request for comment about the Lockheed case. “While Athene is not a party to the putative class action lawsuit involving pension de-risking, we believe the case is without merit. It is also irresponsible and reckless by raising false concerns about the safety of retirement benefits guaranteed by Athene,” a spokesperson for Athene told PLANSPONSOR by email. “Athene is well capitalized, properly reserved, soundly invested and highly rated. We are a safe and secure provider of annuity benefits. All plan participants and beneficiaries continue to receive 100% of their expected benefits. Our outstanding financial strength, our commitment to customer service and our well diversified investment portfolio have made us a trusted provider of choice among pension plan fiduciaries.”