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On September 29, 2025, the United States District Court for the Southern District of New York issued its decision in Doherty, et al. v. Bristol Myers Squibb et al., a pension risk transfer case, denying (in critical parts) defendants Bristol Meyer Squibb’s (BMS) and State Street Global Advisors Trust Company’s (State Street) motions to dismiss.
In 2018, BMS decided to terminate the Bristol-Myers Squibb Retirement Income Plan, a defined benefit pension plan. BMS hired State Street to “assist in selecting an annuity provider.” State Street ultimately recommended that BMS/the plan purchase a group annuity contract from the Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York (Athene) – “two Bermuda-based reinsurers that conducted their first [pension risk transfer] (PRT) in August of 2017.” BMS agreed to the selection of Athene and transferred $2.6 billion in annuitized pension benefits to it. With respect to the transaction, BMS retained $800 million in surplus.
Plaintiffs (former plan participants) brought this suit claiming violations of ERISA’s fiduciary and prohibited transaction rules. In this article, we focus on the court’s finding that plaintiffs have standing to sue and (more briefly) that plaintiffs’ allegations with respect to the ERISA fiduciary violations were sufficient to survive a motion to dismiss.
The question of standing-to-sue has been a key issue in the pension risk transfer litigation, generally turning on whether the plaintiff has adequately alleged an “injury in fact.” No injury-in-fact = no standing = no lawsuit.
Defendants challenging plaintiffs’ standing to sue in PRT cases primarily rely on the Supreme Court’s decision in Thole v. U.S. Bank, which held that (oversimplifying) where plaintiffs are still receiving promised benefits, they have not been injured (“in fact”).
In Doherty v. Bristol Myers Squibb, plaintiffs countered this argument by claiming that the transfer of pension benefits out of the employer plan/ERISA system, with, e.g., fiduciary protections and Pension Benefit Guaranty Corporation benefit insurance, to an annuity carrier/the private annuity system, with less protections, and a greater risk of loss (as a result of a carrier default), was a “factually” less valuable benefit.
In the latter regard, plaintiffs argued that the transfer to Athene was unusually risky (and the annuity benefit, therefore, clearly less valuable) for several reasons:
Athene’s surplus was, they argued, inadequate, alleging that “Athene maintains ‘among the thinnest surpluses’ of any active insurance carrier, ranked at the 689th lowest surplus-to-risk ratio out of 695 active insurance carriers.” And it “maintains a high proportion of volatile, non-liquid investments in its portfolio.”
Athene uses a related, offshore reinsurance vehicle, subject to a more relaxed (Bermuda) regulatory regime.
Athene is owned by private equity company Apollo Global Management, “25% of whose subsidiaries default.”
And Athene has not “been tested through a full economic cycle and [has] never weathered a recession.”
Based on these arguments, the court found that “[t]he Complaint as a whole sufficiently alleges that there is a substantial risk that Athene could default on its obligations and Plaintiffs will not receive their legally entitled benefits. Accordingly, Plaintiffs have shown an injury necessary to sustain Article III standing.”
The court rejected defendants’ argument that the foregoing issues (financial structure, offshore reinsurance, etc.) were obviated by the existence of “a contractual provision requiring Athene to maintain a ‘separate account containing assets sufficient to support the liabilities underlying the annuity contract.’” The court found that it was under no obligation to take notice of the document containing these provisions. It also found that:
Plaintiffs specifically addressed the requirement that Athene maintain a separate account in their Complaint, alleging that “this separate account is not truly ‘ring-fenced’ or insulated from Athene’s general liabilities” because the assets in the account “may also be used to support Athene’s payment obligations under other, separate group annuity contracts” and “Athene has the right to, periodically, withdraw assets from the separate account and transfer them to its general account.”
On this basis, the court rejected the defendants’ separate account argument.
It will be interesting to see, when and if the facts with respect to this separate account are further developed, whether it will prove a viable defense to plaintiffs’ claims.
More consequential for any pension risk transfer, and as an alternative basis for standing, the court seemed to find that (nearly) any pension risk transfer transaction results in an injury-in-fact conferring standing to sue:
All else being equal, an agreement or contract for monthly payments with a panoply of robust protections and guarantees is objectively more financially valuable than a contract for the same monthly payments with unambiguously weaker protections and guarantees. Given the allegations discussed at length above, including those related to the materially different risk profile of Athene [the carrier] vs. Bristol-Myers [the ERISA plan sponsor], the Complaint adequately pleads that the Athene transaction deprived Plaintiffs of the former in exchange for the latter. And that diminution in value represents a tangible economic injury.
We note that other courts have found that, to the contrary, these sorts of allegations are not, under Thole, sufficient to survive a motion to dismiss for lack of standing.
The court also found that plaintiffs had sufficiently pleaded claims with respect to defendants’ compliance with ERISA’s fiduciary duties of prudence and loyalty.
Generally, the court found that “the complaint more than sufficiently alleges that – at the time of the Athene transaction – there was sufficient knowable information suggesting that State Street’s process culminating in the selection of Athene was flawed.” In this regard, the court found:
That Athene was a new market entrant and the $2.6 billion BMS transaction “increased Athene’s [PRT] line of business by nearly 63%.”
Athene had been “ordered to pay a $45 million civil monetary penalty” to New York State for “conducting insurance business related to its Pension Risk Transfer business without a license.”
Athene’s investment portfolio contained “riskier, less liquid and more opaque [assets] . . . such as collateralized loan obligations (‘CLOs’)” than other traditional insurers.
A paper named Athene “as an example of an insurer with a shadow banking business," and as among a group of “life insurance companies [that] hold some of the riskiest portions of the CLOs issued by their own affiliate asset managers against virtually no capital.”
Athene “raised red flags” with respect to the four factors that "industry professionals use to assess an insurer’s risk profile."
The court concluded that “The existence of these knowable facts pointing towards the risky nature of Athene creates a plausible inference that the process State Street used in selecting Athene did not comply with its duty of prudence.”
With respect to the ERISA prudence claim, BMS argued that the decision to select Athene was made by State Street, not by BMS. The court rejected this argument, observing that “[t]he BMS Defendants consented to the selection of Athene.” Moreover, “Plaintiffs adequately allege that State Street breached its fiduciary duty … and that, at a minimum, the BMS Defendants had knowledge of the breach when State Street proposed Athene as the annuity provider.”
With respect to plaintiffs’ breach of the ERISA duty of loyalty claim, the court found that plaintiffs’ allegation – that BMS and State Street (as a significant BMS shareholder) “would [both] directly benefit from a transaction that returned the maximum amount of Plan assets to [BMS]” – to be sufficient to survive a motion to dismiss.
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We have courts going both ways (for-plaintiffs and for-defendants) on standing in these PRT cases. We will probably have to wait for a higher court (or courts) to finally settle that question.
We will continue to follow this issue.