Verizon Communications’ plan to sell its pension obligations to Prudential Insurance Company of America violates federal ERISA law, an association representing Verizon’s 41,000 pensioners alleges in a complaint.
The Association of BellTel Retirees, which filed a federal lawsuit on November 29 to halt the sale of the defined benefit plan assets, states 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 goes on to assert that Verizon is pursuing the sale “simply to enhance its corporate credit rating.”
BellTel President C. William Jones tells National Underwriter that the association is requesting a stay of the transaction pending an adjudication of the case by the federal court where the complaint was filed: the U.S. District Court for the Northern District of Texas, Dallas Division.
“We contend that the sale is a violation of ERISA law,” says Jones. “Most of our retirees would be concerned about the loss of [ERISA] protections” if the sale were completed.
“Since ERISA was created in 1974, it’s working beautifully. And when corporations have run into trouble, the PBGC, which is backed up by the federal government, step into to fulfill pension obligations.
“If the sale were consummated, Verizon’s pensioners would be without ERISA and PBGC guarantees,” he adds.
The transaction calls for Verizon to complete by December the sale of 41,000 ERISA-protected pensions worth $7.5 billion to Newark, N.J.-based Prudential. Assuming the court allows the sale to proceed, Prudential will replace retirees’ pensions with insurance annuities that are not ERISA-protected.
BellTel’s complaint alleges, in part, that the proposed pension sale violates ERISA’s fiduciary duty requirements and prohibition against “discriminatory and intentional interference” with retirees’ rights under the pension plan.