Loading article...
On January 8, 2026, the US District Court for the Southern District of New York dismissed (with prejudice)plaintiffs’ claims in Dempsey v. Verizon, et al., a pension risk transfer case, holding both that plaintiffs lacked standing to sue and that they had failed to state a claim under ERISA. The case is unusual because it did not, as other PRT cases have, involve Athene, and the Verizon annuity contracts included certain protections with respect to, e.g., reinsurance and the treatment of plan assets.
In this article, we focus on the court’s decision on standing, the dispositive issue in nearly all recent pension risk transfer litigation.
On March 6, 2024, Verizon transferred, with respect to two Verizon-sponsored defined benefit plans, $3.8 billion in plan assets to Prudential Insurance Company of America (PICA) and $1.9 billion in plan assets to RGA Reinsurance Company (RGA), entering into two annuity contracts covering transferred plan liabilities valued on Verizon’s financial statement at $5.9 billion, and recognizing a $200 million accounting gain. Plaintiffs are a group of plan participants that alleged they were affected by this transaction.
Plaintiffs claim that, because PICA and RGA use captive reinsurance and Modified Co-Insurance (“ModCo”), this PRT “reduces transparency, increases liabilities, and increases risk of default” on (what had been) plan obligations. The court explains the economics of reinsurance and ModCo arrangements as follows:
In a reinsurance contract, the ceding insurance company transfers a portion of its liabilities, premiums, and associated assets to a reinsurance company. … The ceding insurer remains liable to its policyholders but also has claims against its reinsurer. … In a ModCo transaction, the ceding insurer transfers the risks and premiums of the portion of the policy but does not transfer the corresponding assets. … Instead, the ceding insurer credits the ModCo with the investment returns on the assets.
Plaintiffs claim that these reinsurance and ModCo arrangements compromise the liquidity and solvency of PICA and RGA and therefore put their benefits at risk.
This case is interesting because it does not involve Athene and some of the issues raised in Athene-related PRT litigation. (For details on Athene-related PRT litigation, see our latest article – Risk transfer litigation: more conflicting court decisions.)
Also (and critical to the court’s decision) the Verizon annuity contracts contain language “obligat[ing] the Annuity Providers to place the Plan assets into a separate fund apart from their general funds, prohibits the reinsurance or assignment of the obligations of liabilities from the contracts unless the beneficiaries consent or the Annuity Providers remain obligors to the beneficiaries, and prohibits the transfer of Plan assets in any instance.”
As we have discussed previously, standing to sue requires plaintiffs to show an “injury in fact,” and courts are divided as to whether, in the context of a pension risk transfer in which participants are continuing to receive promised benefits under the plan from the insurance carrier that has assumed plan liabilities, there is an injury in fact.
In this case, plaintiffs alleged three reasons for standing:
With respect to this argument, the court held that, while the complaint “contains numerous allegations about the alleged risk of the Annuity Providers based primarily on their use of captive reinsurance and ModCo,” defendants will continue to “remain obligated” for those benefits regardless of those arrangements, and that “[t]he fund of pension assets [the carriers] received from Verizon cannot be divested.”
Further to this point, the court noted that PICA and RGA had “high financial strength” and “high credit ratings” and that “reinsurance and modified coinsurance are common industry practices.”
Based on the foregoing, the court found plaintiffs’ claims of a substantial risk of future loss of benefits to be “overly speculative and conclusory” and therefore inadequate to support standing.
Plaintiffs claim (somewhat unusually) that because they make only “equitable” claims for relief (e.g., for “disgorgement” of the $200 million accounting gain Verizon realized and an order “placing the annuity contracts inside the Plan and returning the Plan to be under Verizon”), they did not have to claim that there was an injury in fact.
The court rejected this argument, holding that the Supreme Court’s decision in Thole v. U.S. Bank “made clear that in defined-benefit plan cases a Plaintiff must allege harm to the receipt of benefits themselves, not to the overall value of the plan.”
Plaintiffs argued that Verizon’s $200 million gain represented a loss to the plans and should be “disgorged”/returned by Verizon to the plans. The court rejected this argument as a basis for standing, holding that (as with the other equitable remedies above) “a Plaintiff must allege harm to the receipt of benefits themselves, not to the overall value of the plan.”
The court also, and “[d]espite finding a lack of standing,” went on to hold that plaintiffs (even if they did have standing) had failed to state a claim under ERISA. We’re not going to go into this discussion in detail, but we note one interesting aspect of this holding: The court held that to state a claim under ERISA’s fiduciary rules, “Plaintiffs must plausibly allege that no reasonable fiduciary would have selected the Annuity Providers.” And it found that they had not done so, because “[t]he Annuity Providers are reputable insurance companies … [and] Plaintiffs are unable to allege that the actual investments made by the Annuity Providers are suspect or point to other markers that would imply a high risk of default
* * *
The courts remain in conflict on the key issue of standing in these PRT cases, although sponsors are winning more than they are losing.
We will continue to follow this issue.