Compliance September 6, 2024

Lumen Technologies Faces Lawsuit Over PRT, Following Similar Cases

The telecommunications company conducted a $1.4 billion pension risk transfer with Athene Annuity and Life in 2021.

Reported by

Lumen Technologies Inc. and its independent fiduciary, State Street Global Advisors Trust Co., are the latest targets in a litigation trend of filing complaints against pension risk transfers conducted with Athene Annuity and Life Co.

In Dow v. Lumen Technologies Inc. et al., filed in U.S. District Court for the District of Colorado on Wednesday, two Lumen employees are suing the company and State Street for selecting Athene as the annuity provider in a pension risk transfer the company conducted in October 2021.

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

The $1.4 billion transaction involved offloading approximately 22,600 Lumen retirees and beneficiaries of Lumen’s Combined Pension Plan to Athene through group annuity contracts. Athene is not named as a defendant in the lawsuit.

The complaint, like many others filed against employers in the last few months, accuses Athene of being a “highly risky private-equity controlled insurance company with a complex and opaque structure.” By selecting Athene, the plaintiffs allege that the telecommunications company violated its fiduciary duty under ERISA to obtain the “safest annuity available.”

“Athene structures its annuities to generate higher expected returns and profits for itself and its affiliates by investing in lower-quality, higher-risk assets rather than in quality assets that would better support its future benefit obligations,” the lawsuit alleges. “In transferring plaintiffs’ pension benefits to Athene, defendants put Lumen retirees’ and their beneficiaries’ future retirement benefits at substantial risk of default without appropriate compensation.”

An Athene spokesperson commented, “This complaint is an entirely baseless attempt by class action attorneys to enrich themselves at the expense of retirees. Every pension group annuity participant whose benefits have been guaranteed by Athene has received and will receive their promised benefits in full. In each pension group annuity transaction for which Athene has been selected, there has been a robust review process carried out by a fiduciary and their independent advisers who are experts at assessing insurer safety.”

The complaint also argued that Lumen saved a “substantial amount of money” by selecting a group annuity contract form Athene instead of the “actual safest annuity available.”

Earlier this week, Bristol-Myers Squibb Co. and State Street were also sued for a $2 billion PRT they conducted with Athene in 2019.

The plaintiffs in the Lumen Technologies case are represented by law firm Schlichter Bogard LLP. The same firm has represented plaintiffs in similar cases against General Electric Co., Alcoa Corp. and Lockheed Martin Corp.

To remedy the fiduciary breaches, the former Lumen employees seek disgorgement of the sums involved in the PRT transaction and the posting of security to assure receipt by plaintiffs and members of the proposed class of their full retirement benefits.

As of December 31, 2022, Lumen employed approximately 29,000 employees and recorded $17.48 billion in annual net revenue.

Lumen and State Street did not immediately respond to a request for comment.

Data and Research September 6, 2024

Millennials’ Retirement Outlook Shows Potential Improvement as Housing Wealth Rises

While Millennials faced challenges at the start of their careers and continue to carry large amounts of student debt, new research shows significant improvements in the cohort’s wealth holdings.

Reported by

Despite previously lagging behind older generations in wealth holdings, largely due to high levels of student debt, Millennials have shown a “dramatic reversal” in overall wealth since 2022, according to a new paper by the Center for Retirement Research at Boston College.

The increase in median net worth for Millennials is largely due to an increase in housing wealth, the CRR found, reflecting the significant increase in house prices that occurred during the pandemic.

Get more!  Sign up for PLANSPONSOR newsletters.

The low wealth of Millennials, those born between 1981 and 1996, has been a source of concern, given that they will live longer and need to support more years of retirement than previous generations. With the increase in Social Security’s full retirement age to 67, Millennials will also receive fewer benefits relative to pre-retirement income than earlier cohorts, according to the CRR.

In 2019, before the COVID-19 pandemic, Millennials between the ages of 28 and 38 had a median net wealth-to-income ratio of 56%, which lagged behind Generation Xers and Baby Boomers at the time. By 2022, the pattern had reversed, and Millennials, then between the ages of 31 and 41, saw a median net wealth-to-income ratio of 136%, according to the Federal Reserve’s “Survey of Consumer Finances.”

Most of the median wealth gain for Millennials came through housing wealth, which saw a net increase of $45,567 between 2019 and 2022.

Alicia Munnell, director of the Center for Retirement Research at Boston College and one of the authors of the paper, explains that Millennials were old enough to own houses when the pandemic hit, and when housing prices took off, it had a huge effect on the cohort’s wealth-to-income ratios.

“Millennials also were well-positioned to enjoy the gains of the stock market because they tend to invest more in stocks, they’re more likely to have two earners [in their households and] they’re more likely to have fewer kids,” Munnell says. “So that whole package together made their total wealth-to-income [ratio] look much better than earlier cohorts.”

By comparison, Munnell says when Gen Xers were the age Millennials are now, they were in the midst of the Great Recession (2007 to 2009), so they did not experience the same kind of housing and wealth growth.

The CRR also found that the wealth holdings among Millennials were not just concentrated among the wealthy but, rather, occurred across the whole wealth distribution, showing that Millennials in each wealth group are better off.

However, the CRR argued that when it comes to retirement savings, it remains unclear how to assess housing wealth. Even though home equity is an illiquid asset, few people take advantage of this asset to support their consumption in retirement. Instead, many tend to hold their housing equity in reserve to cover any long-term care needs toward the end of life or pass down their housing wealth to their children.

In addition, the CRR noted that current home prices are about 16% above their trend over the last 30 years, so it is possible prices will revert back to the trend over time.

Millennials also still face more student loan debt than Gen Xers or Baby Boomers. According to the Census Bureau’s Current Population Survey, 38% of Millennials had student loans as of 2023, with a median amount of $13,006.

Despite the high levels of student debt and the rough start Millennials had by starting their careers during the Great Recession, Munnell says this cohort is showing clear improvement. Whether this will translate to better retirement savings, however, remains unclear.

«