A federal court has approved a plan by Verizon Communications to sell its pension obligations to Prudential Insurance Company.
In a memorandum and opinion issued on December 7, the U.S. District Court for the Northern District of Texas, Dallas Division okayed the sale. The judge noted the plaintiffs in the civil action, representatives of plan participants and beneficiaries of the Verizon Management Pension Plan, had failed to persuade the court that the relief sought, a preliminary injunction on transaction, was justified.
“Because the plaintiffs have failed to carry their burden of showing a substantial likelihood of success on the merits,” the judge stated in the order, the court rejected the requested for a preliminary injunction.
Verizon plan participants’ complaint rested on several claims. Among them: (1) that Verizon violated ERISA Section 102(b) by not disclosing in its summary plan description that it retained the right to transfer its pension obligations to a life insurance company; (2) that Verizon breached its fiduciary duties, in violation of ERISA Section 404(a)(1); and that (3) Verizon violated ERISA Section 510 by discriminating against the group of affected retires to interfere with their rights under the plan.
In a press statement issued today, Prudential announced that the Verizon Management Pension Plan has purchased a single premium group annuity contract from Prudential Insurance to settle approximately $7.5 billion of pension liabilities of the Plan. Under the terms of the contract, Prudential Insurance assumes the obligation, beginning January 1, 2013, to make future annuity payments to approximately 41,000 members of the Verizon Management Pension Plan.
“We welcome the Verizon retirees who will now receive annuity payments from Prudential,” says Christine Marcks, president of Prudential Retirement, in the statement. “Prudential is focused on helping people achieve retirement security, and we look forward to providing guaranteed lifetime income to these retirees.”
The Association of BellTel Retirees, which filed a federal lawsuit on November 29 to halt the sale of the defined benefit plan assets on behalf of Verizon’s 41,000 pensioners, stated in its complaint that the transaction would permit Verizon to “evade the dictates of the Employee Retirement Income Security Act of 1974…and the protection accorded by the Pension Benefit Guaranty Corporation.”
The complaint went on to assert that Verizon was pursuing the sale “simply to enhance its corporate credit rating.”