I’ve been following this fight between Verizon and Prudential against a group of Verizon retirees. In October, Verizon bought a group annuity worth $7.5 billion to cover the payments for about one-quarter of their existing pensions. This allows them to ease their financial obligations and transfer the obligation and payments to Prudential, who will pay out the retirees through an annuity contract. When I first read about the battle being waged by the actual holders of the pensions, Verizon employees, I was surprised at the big stink. Annuities are a great way to finance retirement and Prudential is a company with great financial strength ratings. Why were the employees so up in arms?
Through more research I found that the employees weren’t necessarily mad about the annuity, but about the process taken to, in essence, sell their pensions. The employees said that Verizon failed to disclose that they had the right to transfer the pensions to an insurance company, which they believe is against the ERISA laws. The Business Insurance article by Kevin Olsen, “Verizon retirees fail to halt pension annuity deal with Prudential,” says that a Judge has ruled in favor of Verizon Communications Inc. and Prudential Insurance Co. of America. The employees were hoping for an injunction blocking the annuity deal this month, but the U.S. District Court Judge said no way.
He didn’t see any way that the employees would win this case and believed it was without merit. He said that Verizon’s summary plan description did not have to disclose these particular changes, only the current terms of the plan. In addition to that, he pointed out that the annuity’s benefits were exactly the same as the pension benefits they would receive from Verizon, so there was no proof that the employees would lose any benefits. Verizon also has some legal jargon in their summary plan saying that they can modify or terminate the plan without any warning to participants, so that seems pretty cut and dry to me. While this serves as a reminder to read all of that fine print associated with your contracts, something we remind annuity purchasers often, it does appear as if Verizon and Prudential will keep the employee pensions in tact within the annuity so that they aren’t losing out.
Written by Rachel Summit
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