GE Joins List of Companies Sued Over PRT Deal with Athene

General Electric Co. has been sued by former participants represented by law firm Schlichter Bogard LLP after completing a pension risk transfer with Athene in 2020.

Add General Electric Co. to the handful of companies sued for completing pension risk transfers with insurer Athene Annuity and Life Co. The litigation is based on the appliance maker completing a $1.7 billion pension risk transfer with Athene in December 2020. 

Law firm Schlichter Bogard LLP is once again representing the three plaintiffs in the case, who are former participants of the GE Pension Plan. The firm is also representing plaintiffs in similar cases against AT&T Inc. Lockheed Martin and Alcoa Corp.  

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In Julie Bueno et al. v. General Electric Company et al., filed in the U.S. District Court for the Northern District of New York, GE is accused of failing to meet the Department of Labor standard for selecting safest available insurer when transferring pension assets and liabilities to an insurance company. In this case, the plaintiffs are challenging GE’s choosing Athene as its insurance provider for the PRT deal, claiming that Athene is a “highly risky private-equity controlled insurance company with a complex and opaque structure.” 

The transaction involved offloading 70,000 GE retirees and their beneficiaries to Athene through purchasing group annuity contracts.  

As of 2020, before the buy-out transaction, the plan covered 289,881 total participants and held nearly $59 billion in net assets available for plan benefits.  

Because GE announced a plan to operate as three separate publicly traded companies in November 2021, the plan was split into three separate plans effective January 1, 2023: GE Aerospace Pension Plan (the new name of the plan); the GE Healthcare Pension Plan; and the GE Energy Pension Plan. As of December 31, 2022, and for years prior, the plan at issue was known as the “GE Pension Plan.” 

The lawsuit alleges that by offloading GE’s pension obligations to Athene, GE caused retirees to “lose their status as ‘participants’ in the ERISA-governed plan, and therefore, become no longer entitled to ERISA’s protections for employee retirement benefits.”  

Although ERISA does not prohibit employers from transferring pension obligations to an insurance company, ERISA does require that a fiduciary obtain the “safest annuity available,” the lawsuit states.  

To remedy these “fiduciary breaches,” the plaintiffs seek the disgorgement of the sums involved in the “improper transactions” and the posting of security to assure receipt by plaintiffs and class members of their full retirement benefits, according to the lawsuit. 

An Athene spokesperson provided the following statement: “T
hese are baseless complaints instigated by class action attorneys who are attempting to enrich themselves at the expense of retirees. Athene is a safe and secure provider of annuity benefits, with outstanding financial strength, proper reserves, excellent capitalization, and strong credit ratings. Pension group annuities provide many protections that enhance retirement security. Insurers like Athene have deep expertise in managing annuity obligations, are subject to robust regulation, and hold regulatory capital to protect policyholders.”

A GE Aerospace spokesperson declined to comment on the pending litigation.

 

Non-Insurer Plaintiffs Join ACLI in Fiduciary Rule Lawsuit

FSI and SIFMA are also asking for the Retirement Security Rule to be vacated.

The Securities Industry and Financial Markets Association and the Financial Services Institute joined a lawsuit against the Department of Labor’s Retirement Security Rule on Friday, broadening the range of firms seeking to beat back the new rule beyond just insurers—who would be hit by rules around annuity sales in particular.

The complaint was initially brought by the American Council of Life Insurers in U.S. District Court for the Northern District of Texas on May 24, following a separate complaint challenging the rule filed in U.S. District Court for the Eastern District of Texas on May 2 by the Federation of Americans for Consumer Choice, an insurance industry group.

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The Retirement Security Rule, finalized in April and taking effect in part in September, would apply fiduciary requirements on a broader range of investment recommendations to include one-time transactions, such as rollovers, annuity sales and investment menu design sales.

Before SIFMA and FSI joined, legal challenges had been led by the insurance industry, which has consistently opposed the rule since it was first proposed. SIFMA is an interest group that represents broker/dealers, investment banks and asset managers; FSI represents independent financial services firms.

The brief filed by SIFMA and FSI, using logic similar to that of the prior suits, argues that the rule is unlawful and should be vacated. The organizations say that it “is materially indistinguishable from the 2016 Rule,” a reference to a previous attempt by the DOL to regulate one-time advice, one which was finalized in 2016 and vacated by the U.S. 5th Circuit Court of Appeals in 2018.

The DOL, in a responsive brief in the same case filed on June 14, argues that the new rule is distinct from the 2016 version because it focuses on the character of the relationship between the professional and the investor instead of capturing any communication and because it lacks provisions requiring certain contractual terms.

The SIFMA and FSI brief continues: “If the 2024 Rule goes into effect, recommendations by a broker-dealer or other financial professional regarding assets in a retirement account, including sales recommendations, will once again be considered ‘fiduciary’ advice even in the absence of an ongoing, mutually recognized advice relationship,” which the groups argue is required by the 5th Circuit opinion. The brief argues that a relationship must be ongoing and continuous in order to entail “trust and confidence,” a key phrase used by the 5th Circuit as encompassing the common-law understanding of fiduciary.

The DOL, in turn, has emphasized that the manner in which a professional presents himself or herself to investors “or holds themselves out” is what establishes whether such a relationship exists.

“Congress did not empower the Department to impose fiduciary duties of prudence and loyalty on broker-dealers and insurance agents that do not have a heightened relationship of trust and confidence with their customers,” the DOL brief explains.

The court has not issued a ruling, and parts of the Retirement Security Rule remain set to take effect in September.

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