Verizon Pensions at Risk: A Cautionary Tale for Retirees

As a retiree, there's nothing more important than the security of your pension benefits. Unfortunately, recent events have raised serious concerns about the safety of Verizon retirees' pensions. A lawsuit filed by three Verizon retirees alleges that the company and its independent fiduciary, State Street Global Advisors, violated their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by transferring $5.9 billion in pension plan liabilities to two insurance companies, Prudential Financial Inc. and Reinsurance Group of America Inc.

The plaintiffs argue that Verizon and State Street chose the "cheapest available" annuities instead of the "safest available," as required by the Department of Labor's Interpretive Bulletin 95-1. This decision, they claim, exposed plan participants to unreasonable amounts of risk and uncertainty. The lawsuit also alleges that State Street directly profited from the annuitization transactions through its common stock holdings in Verizon, Prudential Financial, Inc., PICA's direct parent, and RGA. This financial interest created a potential conflict of interest, as State Street's own financial well-being was tied to the success of the PRT deal.

The plaintiffs further allege that Prudential and RGA are heavily dependent upon transactions with affiliates that are not transparent, and these affiliates are domiciled in "regulation light" jurisdictions where wholly owned captive reinsurers and affiliates are permitted to count debt instruments as assets and are not required to file publicly available financial statements in accordance with Statutory Accounting Principles (SAP). This lack of transparency makes it difficult for State Street and Verizon to assess the financial health and claims-paying ability of these affiliates, potentially putting retirees' benefits at risk.

The lawsuit also points to the example of Executive Life Insurance Co., which offered the lowest bid on group annuity contracts and embarked on a disastrous "junk bond" investment strategy. In 1991, Executive Life became insolvent, and pensioners lost billions in valuable retirement funds for approximately 84,000 workers and retirees who had their pension benefits transferred to the company.

The plaintiffs argue that Verizon and State Street should have requested copies of statutory financial statements that clearly detail affiliated party reinsurance and exposure to risky assets, including assets originated by affiliates. If they had done so, they would have realized the imprudence of choosing Prudential and RGA as suitable stewards for plan participants' pensions. Instead, they chose these providers based on cost savings and other financial benefits, which is inconsistent with the duties of loyalty that Verizon and State Street owed to the plan participant retirees under ERISA.

The lawsuit serves as a cautionary tale for retirees and their beneficiaries, highlighting the importance of careful selection of annuity providers and the potential risks associated with relying on affiliate companies and offshore reinsurance arrangements. As a retiree, it's crucial to stay informed about the financial health and regulatory oversight of your annuity providers to ensure the security of your benefits.



In conclusion, the lawsuit filed by Verizon retirees raises serious concerns about the safety and security of their pension benefits. The allegations of imprudent selection of annuity providers, conflicts of interest, and lack of transparency highlight the importance of thorough research and careful consideration when choosing annuity providers. As a retiree, it's essential to stay informed and vigilant to protect your hard-earned retirement benefits.