Recent lawsuits concerning global enterprises AT&T Inc. and Lockheed Martin Corp. have started to shed light on a potential tipping point for pension risk transfer transactions. Both companies have come under scrutiny for having moved thousands of their workers out of standard pension schemes and into annuity contracts.
Pension risk transfers are frequently employed by corporations who wish to reduce benefit costs and manage risks. These transactions generally involve the company removing workers from their retirement plans and exchanging their pensions for annuity contracts from third-party insurers. As a result, workers end up outside of the protective sphere of federal pension law.
A striking majority, roughly 90% of companies, plan to divest their pension plan liabilities in the future using similar strategies according to undisclosed sources. This has led to a booming business environment that pivots on multi-billion-dollar pension risk transfer transactions. However, the recent legal actions against AT&T and Lockheed Martin indicate that this business strategy might be up against its first substantial challenge.
The details of these lawsuits will potentially set precedents for the whole field of pension risk transfers, as they hinge on intricate legal issues such as standing and class certification. Whether these landmark suits end up putting brakes on pension risk transfers or simply refining their legal and ethical boundaries remains to be seen.
For more detailed information, visit the original article from Bloomberg Law.