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June 26, 2013 at 11:34 AM
A U.S. District Court judge in Texas has dismissed a lawsuit by Verizon retirees to stop the transfer of their pensions to annuities distributed by Prudential.
In an opinion handed down on Monday, Sidney A. Fitzwater, chief judge for the U.S. District Court for the Northern District of Texas, Dallas Division, ruled in favor of Verizon, but also permitted the plaintiffs to re-plead the case.
In October of last year, Verizon signed an agreement to transfer $7.4 billion in pension obligations that covered roughly 41,000 Verizon Management Pension Plan participants to Prudential. Soon after, members of the Association of BellTel Retirees sued to halt the purchase of the group annuity contract, arguing that it violated ERISA rules and would leave the members with weaker protections because the annuities would not be covered under the federal Pension Benefit Guaranty Corp.
Fitzwater dismissed the plaintiffs’ claims that Verizon violated its fiduciary duty and paid an excessive fee to transact the transfer. Prudential was paid an additional $1 billion, according to the suit, Lee v. Verizon Communications Inc., (3:12-CV-4834-D). “Despite the size of the alleged additional payout, the court cannot reasonably infer from the allegation in the amended complaint that it was unreasonable to pay Prudential approximately $8.4 billion,” Fitzwater wrote.
