Yesterday, Verizon announced that it will transfer $7.5 billion of pension liabilities to Prudential.  As we previously discussed in this blog, many sponsors of defined benefit plans, especially frozen plans, are considering ways to “de-risk” by reducing or eliminating the volatility associated with their pension obligations for financial accounting and pension funding purposes.  In April, Ford announced that its pension plan would offer lump sums to 90,000 retirees.  In June, GM announced a different pension de-risking approach: GM’s pension plan is offering lump sums to certain retirees in the context of a plan termination.  GM retirees who do not elect lump sums (or are not offered lump sums) will have their pensions transferred to an insurance company.

Verizon has taken yet another approach to pension settlements.  Verizon’s management pension plan will purchase a group annuity contract under which an insurance company, instead of the plan, will pay retirees’ pensions.  Retirees will not be required to make any choices: they will continue to receive the same pensions, in the same form, from the insurance company.  Verizon’s pension transfer is expected to close in December of this year.  Covington served as ERISA counsel to Verizon in this transaction.

Verizon’s announcement, following Ford’s and GM’s pension settlements, indicates that the pace of pension settlements will continue.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Amy N. Moore Amy N. Moore

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation…

Amy Moore advises public and private companies and tax exempt organizations on a wide range of tax, ERISA, and employment law issues concerning all types of benefit programs.  Ms. Moore counsels some of the world’s largest multinational companies on the design and implementation of innovative benefit strategies, including the restructuring of retirement programs to meet the needs of the modern work force; the use of surplus pension and insurance assets to provide non-traditional benefits; and the establishment of funding and security arrangements for welfare plans and executive compensation.  She represents clients in connection with pension fund investments in private equity funds, hedge funds, group trusts, and derivatives.  She also advises on benefits and compensation issues in acquisitions and divestitures, debt finance, joint ventures, and other corporate transactions.  Ms. Moore represents companies in audits and contested agency proceedings involving benefit plans and advises clients on employee benefits issues that arise in connection with ERISA litigation and settlements.  She also counsels employers on issues of plan administration and the correction of operational problems under government-sponsored remedial programs.

Photo of Robert Newman Robert Newman

Robert Newman represents clients ranging from small employers to some of the nation’s largest employers, including for-profit and tax-exempt entities.  His practice includes designing, drafting, and amending a wide range of retirement plans (including 401(k) plans, ESOPs, and traditional and hybrid defined benefit…

Robert Newman represents clients ranging from small employers to some of the nation’s largest employers, including for-profit and tax-exempt entities.  His practice includes designing, drafting, and amending a wide range of retirement plans (including 401(k) plans, ESOPs, and traditional and hybrid defined benefit plans) and welfare plans (including health, severance, and cafeteria plans); creating executive compensation arrangements including nonqualified deferred compensation plans, stock option plans, and other incentive plans; representing clients before the IRS and the Department of Labor; assisting clients with legislative initiatives; providing benefits expertise in corporate transactions and ERISA litigation; counseling clients with respect to pension fund investments in private equity funds and hedge funds; and negotiating and writing employment agreements.