Verizon, Prudential $7.5 billion pension risk transfer deal to go ahead

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About a week ago we wrote about the challenge to the $7.5 billion pension risk transfer transaction which would see Verizon Communications transferring $7.5 billion of the Verizon Management Pension Plan obligations to insurer Prudential. The deal was hit with a lawsuit from two Verizon retirees who filed suit seeking to block the transaction as they claimed the transfer of pension liabilities to Prudential would remove a layer of government protection they had benefitted from.

The retirees claimed that the completion of the deal would cause them to lose some of the protection afforded by U.S. government backed schemes such as the Employee Retirement Income Security Act (ERISA) and Pension Benefit Guaranty Corporation (PBGC). The deal, which would involve Verizon buying an annuity contract from Prudential who would then take over responsibility pension payments to the covered 41,000 retirees.

aiCIO has the story here. The lawsuit has been unsuccessful in trying to prove that Verizon was breaching its fiduciary duties by handing over responsibility for the pensions ongoing maintenance to Prudential, and the court ruled that it is not a fiduciary act to amend or terminate a pension plan. Indeed Prudential said in court filings that it believed the pensioners would be better off after the transaction and would be more secure in their expected retirement payments.

The transaction has until the 17th December to close or must be renegotiated, according to the court filings.

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