Table of Contents
Introduction
A term that became popular several years ago among sponsors of ERISA [1] -governed defined benefit plans is “de-risking,” although the issue is now more commonly described as pension risk transference (PRT). The term refers to the shifting of responsibility for meeting pension funding and payment obligations from the plan sponsor to an insurer providing annuity payments. The trend to annuitize pension obligations has been growing since the 1980’s, but the collapse in the early 1990’s of Executive Life Insurance Company,[2] a popular vendor of annuities for corporations looking to offload their pension obligations, resulted in enhanced scrutiny of such transactions.
Executive Life’s failure was due to its outsized investments in high-risk junk bonds, which led the U.S. Department of Labor to issue Interpretive Bulletin 95-1.[3] The Interpretive Bulletin (IB 95-1) emphasized retirement plan sponsors’ duty of due diligence in selecting the “safest available annuity.” Clarifying the meaning of that term, the Department of Labor recognized that there may be situations where selection of the safest available annuity is not necessarily in the interest of the participants and their beneficiaries due to higher costs. Such situations may arise where the safest annuity is only “marginally safer, but disproportionately more expensive than competing annuities, and the participants and beneficiaries are likely to bear a significant portion of that increased cost.” In June 2024, the Department of Labor reported to Congress on the continued viability of IB 95-1 after receiving input from the ERISA Advisory Council.[4] While recognizing potential concerns about ongoing pension risk transfers, the guidance offered by the Interpretive Bulletin was found to remain relevant and comprehensive, and no amendments to IB 95-1 were proposed.
In a prior article,[5] I discussed some of the existing concerns about PRTs, especially when the annuity provider selected has been Athene, which is a wholly owned subsidiary of Apollo Global Management and is heavily reliant on private equity and credit investments. Since writing that article, which noted the recent filing of lawsuits challenging pension risk transfers, there have now been multiple court rulings on motions to dismiss such lawsuits with varying results. This article will discuss those rulings and analyze the issues faced by plan participants whose pensions have been transferred by their employers to annuity providers that utilize non-traditional capital structures.
Article III Standing
The principal issue raised in the pending litigation is whether the plaintiffs possess Article III [6] standing, which necessitates either actual or threatened harm. Two cases have found that plaintiffs have standing to pursue their claims and have denied motions to dismiss – Konya v. Lockheed Martin Corp. [7] and Doherty v. Bristol-Myers Squibb.[8] However, two other cases have ruled to the contrary – Camire v. Alcoa USA Corp.,[9] and Schoen v. ATI, Inc. [10] Other cases that have addressed these issues are also cited.
No Standing Found
Camire v. Alcoa
Beginning with the rulings that found an absence of standing, in Camire v. Alcoa, the plaintiffs were all participants in Alcoa’s defined-benefit pension plans. A key feature of such plans is that under the protections afforded by ERISA, the employer bears the risk of default or failure to meet the plan’s payment obligations. If the employer cannot meet those obligations due to insolvency, the Pension Benefit Guaranty Corporation (PBGC) provides a backstop to ensure that retirees receive payment.
To mitigate its funding risk, Alcoa transferred $2.79 billion of its pension liabilities for approximately 30,000 employees to Athene Annuity & Life Co. and Athene Anuity and Life Company of New York, which then assumed the responsibility to pay benefits to the plan participants in accordance with the terms of the plan. While the benefits remained the same, Alcoa’s transfer to Athene resulted in the plan participants losing their rights under ERISA to enforce the terms of the plan against Alcoa, leaving Athene as the party responsible for payment in the event of default under state law backed up only by state guaranty associations (SGAs) rather than the PBGC. However, the amount of protection offered by SGAs vary from state to state and some participants could lose a significant portion of their retirement benefits in the event of an annuity provider’s insolvency.[11]
The plaintiffs in Camire maintained that Alcoa failed to purchase the “safest available annuity” because of Athene’s “focus on private equity”; its “questionable creditworthiness”; its “use of untrustworthy credit rating agencies”; its investment in “far riskier assets” compared to other annuity providers; and its “reinsurance of annuities with offshore affiliates.” Thus, plaintiffs alleged that Alcoa’s pension risk transactions with Athene placed their retirement benefits at substantial risk of default.
The defendants responded by arguing the plaintiffs failed to allege sufficient facts to establish standing under Article III of the Constitution, which limits federal court jurisdiction to “’actual cases or controversies” and not just hypothetical concerns. To establish standing, plaintiffs are required to show: “ (1) an ‘injury in fact’ that is ‘concrete and particularized’ as well as ‘actual or imminent’; (2) a ‘causal connection’ between the injury and the challenged conduct; and (3) a likelihood, as opposed to mere speculation, ‘that the injury will be redressed by a favorable decision.’” [12]
The defendants relied primarily on the Supreme Court’s ruling in on Thole v. U.S. Bank N.A., [13] in support of their argument that the plaintiffs failed to show actual or imminent harm. In Thole, the Supreme Court rejected a claim that an employer-sponsor of a defined benefit plan diminished the plan’s value by making poor investment decisions, resulting in a $750 million loss in plan assets. The Court ruled that since the participants were all continuing to receive their scheduled benefits and were expected to continue receiving undiminished benefits irrespective of the plan’s diminished value, there was no actual harm. The court summarized Thole by observing: “In other words, even where participants in a defined-benefit plan could show that the overall value of their plan had suffered a significant loss, that fact was insufficient to confer standing on plan participants whose monthly payments had not been affected.”[14] Relying on that ruling, the court maintained that since no participants had sustained an immediate or faced an imminent loss of benefits resulting from the pension risk transfer, there was no actual harm and therefore no standing.
Plaintiffs also argued that if a default occurred after the expiration of the statute of limitations for breach of fiduciary duty (six years)[15] they would be left without any remedy against Alcoa. However, the court rejected that argument on the ground that if a default occurred, the plaintiffs would have a claim that could provide them with full relief against Athene rather than Alcoa.
Camire also rejected the plaintiffs’ claim they faced a substantial risk of future harm since the plaintiffs did not and could not plausibly allege a substantial probability that harm would occur,[16] finding:
- Plaintiffs do not allege that Athene is at a high risk of failure – just that it is at a higher risk of failure than other annuity providers. While these allegations, accepted as true, may suffice to establish “a substantially increased risk of harm,” they fail to show “a substantial probability of harm with that increase taken into account.”[17]
The court further explained that for the plaintiffs’ claim to succeed, the following would need to take place:
- First, Athene would need to fail, which means that it would have to (1) “suffer[] catastrophic losses;” (2) “fail[] to sufficiently mitigate any such losses to preserve Plaintiffs’ benefits;” and (3) fail “to secure alternative funding sources.” Then, Plaintiffs would need to have benefits that actually exceed the amount that their SGAs cover, which is over $250,000 in most states. Finally, Athene’s accounts would need to be underfunded or insufficient to cover participants’ losses in the event of failure. Because Plaintiffs’ allegations do not plausibly suggest that this “highly attenuated chain of possibilities” is likely, the court cannot conclude that any harm to Plaintiffs is “certainly impending,”[18]
Consequently, the court granted the motion to dismiss and dismissed the lawsuit with prejudice.
Schoen v. ATI
The Schoen ruling was a recommendation and report issued by a federal magistrate judge which recommended dismissal of the class action brought against Allegheny Technologies, Inc. (ATI) relating to the annuitization of ATI’s defined benefit plan which covered approximately 8,200 plan participants. Like Camire, the ATI decision focused on standing and the question of whether the plaintiffs could show actual or imminent harm as required by Thole, a ruling the court deemed “directly on point.” The court acknowledged that some courts had found the existence of standing in similar cases, while others did not.[19] The court focused on the fact that the plaintiffs were receiving the same monthly benefits as the benefits they were receiving before the PRT transaction. Responding to the plaintiffs’ argument that the annuitization of benefits diminished their value, the court observed, “Since Plaintiffs received, and will receive, the same monthly payments regardless of the value of the plan, standing cannot be predicated on their theory of diminished value.” The court added that since the plaintiffs were entitled only to their promised pension benefits irrespective of diminution or enhancement of the plan’s valuation, their claims of damage or injury were not well-founded.
Schoen was also dismissive of the plaintiff’s imminent harm arguments, citing the language from Camire quoted above. A “possible future injury” was found insufficient to confer standing. The court concluded with the following observation:
- The Court is mindful of the seriousness of Plaintiffs’ concerns and appreciates the presence of Plaintiffs at argument. But sympathy for Plaintiffs’ situation cannot create standing where the Supreme Court has said none exists. Under Thole, Article III standing requires a concrete injury, and on the allegations pled, that standard is not met.[20]
Standing Found
The opposite view, represented by the Doherty and Konya rulings applied a different rationale.
Doherty v. Bristol-Myers Squibb
The Doherty case also involved a pension transfer to Athene. When Bristol-Myers Squibb transferred its pension liability, it was able to retain $800 million in excess funding left over after pension liabilities of $2.6 billion were annuitized. Relying on the same authorities cited in the decisions discussed above, the court came to the opposite conclusion. The court accepted as true the plaintiffs’ allegations concerning the existence of a “substantial risk” Athene would default on its obligation, explaining “the sole issue is whether the Athene transaction exposed Plaintiffs to a ‘substantial risk’ of that ham occurring, such that they can bring their suit based on that transaction rather than waiting until their promised benefits do not arrive.”[21] The court, which was required to accept the plaintiffs’ well-pled factual allegations as true in deciding a motion to dismiss,[22] then concluded:
- In sum, Athene maintains one of the lowest surplusto-risk ratios of all general insurance companies, an apparently key indicator of riskiness. It maintains a high proportion of volatile, non-liquid investments in its portfolio. Both it and its reinsurers—all based in Bermuda, a jurisdiction with relatively relaxed regulations for insurance, are owned by Apollo, 25% of whose subsidiaries default. And Athene has not “been tested through a full economic cycle and [has] never weathered a recession,” a fact made more worrying by the other risk factors identified above.[23]
Doherty expressly disagreed with a key finding made in the adverse decisions, concluding that the diminished value of the plan’s assets constituted an actual harm to the plaintiffs. The court gave the following rationale for its conclusion:
- This conclusion flows from the basic premise that— 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 vs. Bristol-Myers, 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.[24]
The court also determined that the plaintiffs’ loss of the protections and guarantees offered by ERISA constituted a tangible harm. In addition, the court pointed to a basic purpose of ERISA – to provide protections aimed at insuring that workers receive the benefits that have been promised to them.[25] Likewise, the court resorted to common sense, observing: “Beneficiaries who will rely on their retirement benefits to support them through their senior years of course have a strong interest in not only the amount of their monthly benefits about also the security of their monthly benefits.”[26]
Konya v. Lockheed Martin Corp.
The earlier Konya ruling came to the same conclusion as the Doherty decision, but with far less analysis. However, the court subsequently stayed its ruling and granted a motion to certify the issue for interlocutory appeal.[27] Recognizing that its earlier ruling was at odds with the Camire decision, the court determined the issue was suitable for interlocutory review, and the Fourth Circuit issued an order on September 9, 2025 granting the application for interlocutory review.
Discussion
The Department of Labor’s guidance following the collapse of Executive Life made it clear that while ERISA permitted annuitization of pension obligations, pension plan sponsors could not choose any annuity provider but were required to choose the “safest available annuity.” The allegations made by plaintiffs in the most recent wave of pension risk transfer litigation have raised sound reasons to believe that the choice of Athene as the annuity provider was imprudent. However, as of the date of this article, there have been no defaults by Athene, and each participant has continued to receive the same benefit they were receiving prior to the PRT. This means both sides have strong arguments in their favor – the plaintiffs have laid out a credible case demonstrating an enhanced risk of default, but the defendants justifiably maintain there have been no losses, that the risk of default is purely hypothetical, and the plaintiffs consequently have not suffered any tangible injury.
Were it not for the collapse of Executive Life in the 1990s, there might be less concern as to the potential riskiness of the choice of Athene (and perhaps other insurers as well, although all the litigation to date has been focused on Athene) as an annuity provider for PRTs. However, the nature of Athene’s capital assets and its use of a captive Bermuda-domiciled reinsurer to potentially backstop losses raises considerable concern about whether Athene was the safest annuity provider.
Retirement security, a principal goal of ERISA, is substantially jeopardized by such a PRT. The litigation also raises the question of whether it is fair to make participants wait until they suffer a loss of benefits before they can seek recourse?
The thorough discussions of these issues in the Camire and Doherty decisions are the clearest analysis of the competing issues posed in PRT litigation, which comes down to the question of whether the plan sponsors in those cases selected the safest available annuity. The plaintiffs who brought these cases are entitled to know the answer. While discovery may be time-consuming and expensive, it will reveal whether the plaintiffs’ concerns are warranted. If the annuities offered by Athene are as more than marginally less safe than annuities offered by more traditional life insurers such as Prudential Insurance Company of America, New York Life, or MassMutual, the plaintiffs need to prove it.
To be sure, the Supreme Court’s Thole ruling presents a tremendous challenge to the plaintiffs, but in that case, even if the pension plan was mismanaged, U.S. Bank remained obligated to make good any future losses to plan participants so that they receive their promised benefits. Once a PRT takes place, though, that protection and the other protections offered by ERISA are no longer present, leaving participants with little recourse beyond state guaranty associations if the annuity provider becomes insolvent. Thus, Thole may not be as large an obstacle as the courts in Camire and Schoen believed.
Conclusion
When Congress passed the ERISA law in 1974, the stated policy goal behind the enactment was to protect the “interests of participants in employee benefit plans and their beneficiaries,” to “establish[ ] standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for ready access to the federal courts.”[28] One of the key factors motivating the ERISA’s passage was the 1963 collapse of the Studebaker Packard Corporation, which left the rank and file workers without the pension benefits that had been promised to them.[29] Congress’ action in passing ERISA promised workers that retirement security was so important, another collapse like the Studebaker-Packer debacle could never result in the complete loss of promised workers’ pensions.
Since history provides an important guide to the future, the failure of the ERISA law to head off the Executive Life disaster should be viewed as a cautionary lesson as to the potential risk faced by retirees whose pensions have been transferred to an insurer structured in the same illiquid manner as Athene. Merely because there has not yet been any tangible economic damage suffered by plan participants does not diminish the risk of such harm occurring in the future. Should there be a future insolvency, by the time it happens, it may be too late to redress the devastating harm an insolvency would cause.
The courts that have found a lack of standing have failed to appreciate that the plan participants have already suffered harm from their employer’s PRT transaction, since their retirement security is no longer as solid as it was prior to the risk transfer. The protections offered by ERISA and its fiduciary obligations, as well as the safety net afforded by the Pension Benefit Guaranty Corporation, have been traded for less robust protections under state law and a weaker safety net provided by state guaranty associations. The value of participants’ pensions has also been devalued since the market seems unlikely to value an Athene annuity as equal to an employer’s guaranty or to an annuity offered by a traditional life insurer.[30] Those concerns need to be addressed through discovery and trial rather than by stopping the present litigation in its tracks. Plaintiffs are entitled to know now whether their employers have maintained the guaranteed retirement security they promised or sold them down the river.
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Bender’s Labor & Employment Bulletin on November 2025.
[1] ERISA is an acronym for the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq.
[2] For the story of Executive Life’s collapse, see “What Happens When Your Insurer Goes Under”” New York Times November 14, 2008.
[3] 29 C.F.R. § 2509.95-1 – “Interpretive bulletin relating to the fiduciary standards under ERISA when selecting an annuity provider for a defined benefit pension plan.”
[4] Department of Labor Report to Congress on Employee Benefits Security Administration’s Interpretive Bulletin 95-1, available at https://www.dol.gov/sites/ dolgov/files/EBSA/laws-and-regulations/laws/secure-2.0/ report-to-congress-on-interpretive-bulletin-95-1.pdf.
[5] DeBofsky, “Pension Annuitization – De-Risking or Added Risk?” 24 Bender’s Labor & Employment Bulletin 233 (September 2024).
[6] U.S. Constitution, Article III.
[7] Konya v. Lockheed Martin Corp., 2025 U.S. Dist. LEXIS 139240, 2025 LX 274843 (D. Md. Mar. 28, 2025).
[8] Doherty v. Bristol-Myers Squibb, 2025 U.S. Dist. LEXIS 192253 (S.D.N.Y. Sept. 29, 2025).
[9] Camire v. Alcoa USA Corp., 2025 U.S. Dist. LEXIS 59307 (D.D.C. Mar. 28, 2025).
[10] Schoen v. ATI, Inc., 2025 U.S. Dist. LEXIS 198455 (W.D. Pa. Oct. 7, 2025).
[11] “Are Annuities Insured?”, available at https:// smartasset.com/retirement/are-annuities-insured.
[12] Citing Ark Initiative v. Tidwell, 749 F.3d 1071, 1075, 409 U.S. App. D.C. 346 (D.C. Cir. 2014) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)).
[13] Thole v. U.S. Bank N.A., 590 U.S. 538, 140 S. Ct. 1615, 207 L. Ed. 2d 85 (2020).
[14] 2025 U.S. Dist. LEXIS 59307 at *12.
[15] 29 U.S.C. § 1113(1)(a).
[16] Citing “ Pub. Citizen, Inc. v. Nat’l Highway Traffic Safety Admin., 489 F.3d 1279, 1295, 376 U.S. App. D.C. 443 (D.C. Cir. 2007).
[17] 2025 U.S. Dist. LEXIS 59307, at **22-23 (record citations omitted).
[18] 2025 U.S. Dist. LEXIS 59307, at **23-24 (citation omitted).
[19] In addition to the cases highlighted here, Piercy v. AT&T, 24-cv-10608, 2025 U.S. Dist. LEXIS 171943 (D. Mass. Aug. 29, 2025) found that plaintiffs had standing, while Bueno v. Gen. Elec. Co., No. 1:24-CV-0822, 2025 U.S. Dist. LEXIS 189475 (N.D.N.Y. Sept. 24, 2025) did not.
[20] 2025 U.S. Dist. LEXIS 198455, at **19-20.
[21] 2025 U.S. Dist. LEXIS 192253, at *14.
[22] Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 120 S. Ct. 1937 (2009).
[23] 2025 U.S. Dist. LEXIS 192253, at *17 (record citations omitted).
[24] 2025 U.S. Dist. LEXIS 192253, at *21.
[25] 2025 U.S. Dist. LEXIS 192253, at *26 (citing Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996) (“[W] hen Congress enacted ERISA it wanted to make sure that if a worker has been promised a defined pension benefit upon retirement—and if he has fulfilled whatever conditions are required to obtain a vested benefit—he actually will receive it.”)).
[26] 2025 U.S. Dist. LEXIS 192253, at **26-27 (emphasis in original).
[27] Konya v. Lockheed Martin Corp., 2025 U.S. Dist. LEXIS 139240 (D. Md. July 22, 2025).
[28] 29 U.S.C. § 1001(b).
[29] Wooten, “’The Most Glorious Story of Failure in the Business’” The Studebaker-Packard Corporation and the Origins of ERISA,” 49 Buffalo L. Rev. 693 (2001).
[30] Another concern is that pension benefits are inalienable according to 29 U.S.C. § 1056(d)(1), thus offering an additional paternal protection to plan participants during their retirement years. However, annuities can be sold according to Annuity.org (https://www.annuity.org/ selling-payments/faqs/), which means that plan participants may be tempted to accept a smaller cash settlement in lieu of a lifetime stream of payments, placing their retirement income at even greater risk.
