Massachusetts Judge Dismisses Pension Risk Transfer Lawsuit Against AT

What's Happening?

A Massachusetts judge has dismissed a consolidated pension risk transfer lawsuit filed against AT&T Inc. and State Street Global Advisors. The lawsuit, which dates back to March 2024, alleged that AT&T's decision to transfer $8.05 billion in pension liabilities to Athene Annuity and Life Co. endangered the retirement benefits of 96,000 retirees. The plaintiffs claimed that State Street, acting as AT&T's independent fiduciary, stood to benefit from the transfer. The dismissal was based on the failure to state a claim for breach of fiduciary duty, as the plaintiffs could not demonstrate that a prudent fiduciary would have found Athene unsuitable as an annuity provider. The decision follows a Supreme Court precedent that requires proof of loss of benefits due to a breach of fiduciary duty.

Why It's Important?

The dismissal of this lawsuit is significant for the pension risk transfer (PRT) industry, as it reinforces the legal standards required to challenge such transfers. The decision may deter future lawsuits against companies engaging in PRT deals, potentially encouraging more firms to consider similar strategies to manage pension liabilities. This outcome is particularly relevant for large corporations with substantial pension obligations, as it provides a legal precedent that supports the use of PRTs to offload pension risks. However, it also raises concerns among retirees and advocacy groups about the security of retirement benefits when transferred to private equity-controlled insurance companies.

What's Next?

Following the dismissal, it is likely that AT&T and other companies will continue to pursue pension risk transfers as a viable strategy for managing pension liabilities. The decision may prompt further scrutiny of the fiduciary responsibilities involved in such transactions, potentially leading to more stringent regulatory oversight. Retiree advocacy groups may seek legislative changes to ensure greater protection for pension benefits in future PRT deals.