Verizon moves pension obligations to Prudential
Phone company Verizon Communications on Monday said it has transferred $7.5 billion in pension obligations to Prudential Insurance after a retiree association failed to convince a court to stop the move.
Members of the Association of BellTel Retirees sued in federal court in Dallas two weeks ago to stop the deal, saying it would weaken the legal protections for retirees. It effectively turns the company's defined-benefit pensions into annuities to be paid by Prudential. Annuities aren't covered by the federal Pension Benefit Guaranty Corp.
On Friday, the judge ruled that the retirees had failed to show they were likely to be harmed by the deal.
Curtis Kennedy, a lawyer for the plaintiffs, said they will likely appeal that decision. If they win on appeal, the companies may have to unwind some of the deal, he said.
"The legal issues are most significant for not only the group of affected Verizon management retirees, but for all corporate American retirees whose pensions are presently being sponsored by their former employers," Kennedy said.
The Verizon plan covered 41,000 management retirees.
New York-based Verizon Communications has said that the deal lowers the risk that its pension obligations will end up costing more than projected.
Defined-benefit plans, which guarantee company-paid monthly retirement payments, are dwindling. Only 15 percent of private-sector workers participate in such plans, according to the Employee Benefit Research Institute. That 2008 figure was down from 38 percent in 1979.