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Benefits March 6, 2024
Insurers to Assume Pension Obligations for 56,000 Verizon Retirees
The telecom giant announced the transfer of $5.9 billion in pensions to Prudential and RGA; payments from the insurers to beneficiaries start July 1.
Reported by Amy Resnick
Plan sponsor Verizon Communications Inc. this month completed a $5.9 billion pension risk transfer by purchasing single-premium group annuity contracts with two insurers covering 56,000 retirees, according to information the company filed with the Securities and Exchange Commission on Wednesday.
The group annuities, from Prudential Insurance Co. of America and RGA Reinsurance Co., will provide benefits to retirees that began receiving payments from the Verizon pension plans before January 1, 2023, according to the filing. Purchase of the contracts closed on March 6. Prudential is based in New Jersey, and RGA is based in Missouri.
State Street Global Advisors Trust Co., based in Boston, is acting as the independent fiduciary of the affected pension funds, the Verizon Management Pension Plan and the Verizon Pension Plan for Associates.
“Prudential and RGA each irrevocably guarantee and assume the sole obligation to make future payments to the Transferred Participants as provided under their respective group annuity contracts, with direct payments beginning July 1, 2024,” the filing stated. “Prudential and RGA will each assume 50% of the benefit obligation related to Transferred Participants, except in certain jurisdictions where Prudential will assume 100% of the benefit obligation related to Transferred Participants residing in such jurisdictions.”
Verizon reported in the filing that it made additional contributions of about $365 million to the pension plans prior to the closing date of the transaction, which will mean that the funded ratio of each plan will not change as a result of this transaction.
The aggregate amount of each participant’s payment under the group annuity contracts “will be equal to the amount of each individual’s payment” under the pension funds, according to the Verizon filing.
Verizon in 2012 transferred $7.5 billion in pension obligations to Prudential.
The recent transaction comes as the Department of Labor is overdue to release the results of its work to study and report on its findings about its Interpretive Bulletin 95-1, which governs fiduciary standards for selecting an insurer for a pension annuitization.
The SECURE 2.0 Act of 2022 required the DOL to study IB 95-1 and report its findings and any recommended changes to Congress by the end of this year. At hearings last year, hosted by the DOL’s ERISA Advisory Council, insurers said the existing procedure is working well, but some acknowledged that positive changes could still be made.