Class Action Alleges AT&T Transferred Pension Plan Liabilities to ‘Highly Risky’ Insurance Company

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A proposed class action alleges AT&T and subsidiary AT&T Services, Inc. “[gambled] with retirees’ livelihoods” when they transferred AT&T pension benefit plan liabilities to a “highly risky” insurance company in April 2023.

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The 36-page lawsuit claims the companies breached their fiduciary duties under the federal Employee Retirement Income Security Act (ERISA) when they shifted more than $8 billion in AT&T retirement plan liabilities—benefits entitled to 96,000 AT&T participants and beneficiaries—to Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York, which are known to be “substantially riskier” than traditional annuity providers.

The suit contends that in doing so, AT&T, with the help of so-called “independent fiduciary” and co-defendant State Street Global Advisors Trust Co., ejected retirees from the plan and put their pensions beyond the ERISA’s protections.

Plan participants and beneficiaries, whose benefits are no longer guaranteed by AT&T, “face the danger—now and in the future—that their lifelong pensions will go unpaid,” the case alleges.

In a defined benefit pension plan such as AT&T’s, the employer pays monthly pension benefits to participants for the rest of a retiree’s life, the suit states. However, because such plans are expensive for sponsors, a recent trend has seen numerous employers offload their liability for monthly benefits payments to third-party insurance companies through the purchase of group annuity contracts, the filing explains.

“The upside of such transactions—enjoyed by plan sponsors—is increased profits; the downside—borne by plan participants—is the increased risk of losing promised retirement benefits, because the annuity provider is unable to perform and the benefits are no longer guaranteed by their former employer … ,” the lawsuit relays.

According to the suit, the defendants were required by ERISA to act solely in the best interest of plan participants when selecting an annuity provider. Despite their obligations, the companies chose Athene “because it was cheaper for AT&T than safer, traditional annuity providers that have a proven record of the financial strength,” the case charges.

As such, the complaint claims AT&T and State Street breached their fiduciary duties under ERISA by selecting Athene, a choice that was “neither safe, reasonable, nor prudent” and which was made to secure an “enormous profit.”

As the filing tells it, after the April 2023 transfer, Athene—a “highly risky” annuity provider involved in the “shadow banking” sector—is now entirely responsible for paying AT&T retirees’ pension benefits.

“The transaction thus greatly increased the risk—and indeed created a substantial risk—that [the plaintiffs] will not receive the retirement benefits that they have earned and which they are owed,” the case alleges.

The lawsuit looks to represent any participant or beneficiary ejected from the AT&T pension plan by the transaction between AT&T, State Street and Athene.

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