BellTel president: sale of Verizon pension assets to Prudential violates ERISA law

The complaint also charges that that the sale “undermines Congressional intent to provide American pensioners with a uniform safety net under the auspices of the PBGC.”

Randal Milch, executive vice president and general counsel of Verizon, says in a prepared statement that the law is without merit.

“Verizon’s actions regarding its pensions protect the interests of our retired management employees,” he says. “The monthly pension benefits of the retirees receiving an annuity from Prudential will remain unchanged.  Prudential is providing an irrevocable commitment to make all future annuity payments, and this promise will be supported by the extra protection of assets being placed in a separate account at Prudential dedicated to Verizon retirees.

“Prudential has a long history of providing group annuity benefits and already provides pension plan services to 3.7 million workers and retirees nationwide,” Milch adds. “An independent fiduciary conducted an extensive review of the insurance market and annuity providers and selected Prudential as the annuity provider, with the safety and protection of pension plan participants being the sole consideration.” 

The complaint aside, Jones voices policy concerns about the intended sale, noting that if more companies were to follow Verizon’s course—General Motors earlier concluded a similar pension sale with Prudential—then the PBGC would have fewer funds to back-stop pension obligations of financially troubled companies. “The PBGC depends upon premiums paid by healthy corporations like GM and Verizon to fulfill its mission,” says Jones. “I would think the PBGC would become more than a little concerned about other healthy corporations following this trend.”

Jones also expresses concern about Prudential’s ability to meet its pension obligations under the sale. He describes as less than “robust” Prudential’s financial position, noting that the company’s liabilities are only 4% less in value than the assets recorded in its balance sheet.

Verizon retirees could be put further at risk, he adds, if Prudential were to resell the pension obligations to another, financially weaker life insurer.

Verizon might secure BellTel’s acceptance of the intended sale if retirees were offered a lump sum distribution in lieu of an insurer-funded annuity.

“This is not necessarily the best option, as some people can’t manage their money very well,” says Jones. “But it’s a fair alternative. A lump sum payment would be a more palatable arrangement.”