August 21, 2015 –The 5th U.S. Circuit Court of Appeals has affirmed dismissal of a class-action lawsuit that arose from the decision by Verizon Communications in October 2012 to purchase a single premium group annuity contract from The Prudential Insurance Company of America to settle approximately $7.4 billion of Verizon’s pension plan liabilities.
The case includes two classes of pension plan participants: those whose benefit liabilities were transferred to Prudential and those whose liabilities remained in the plan. The appellate court agreed with the dismissal of claims of the non-transferee class by a district court because the class did not prove individual harm and, therefore, lacked standing to sue.
Plaintiffs in the transferee class argued that the Verizon defendants violated their duties under the Employee Retirement Income Security Act (ERISA) in part because summary plan descriptions (SPDs) prior to the plan amendment providing for the transfer to Prudential did not disclose the possibility that benefit obligations could be transferred to an insurance-company annuity absent a plan termination or spin-off/merger. The 5th Circuit found that argument lacked merit in light of its precedent, which holds that ERISA does not require SPDs to describe future terms, and statutory language requires only retrospective notice of plan amendments. In its opinion, the court noted that ERISA only requires that administrators provide a summary of material modification or change “not later than 210 days after the end of the plan year in which the change is adopted.”
The court found that the plan fiduciaries provided notice shortly after the amendment’s adoption, well within the time limits imposed for notice of plan amendment. It also noted that the pre-amendment SPDs advised participants of Verizon’s reservation of the right to amend the plan, and the possibility that an amendment might affect their rights under the plan.
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