ERISA Lawsuit Claims General Electric Company Transferred Aerospace Pension Plan Assets to ‘Highly Risky’ Insurer

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A proposed class action lawsuit claims General Electric Company (GE), as well as the company’s board of directors, pension board, and CEO H. Lawrence Culp, Jr., breached its fiduciary duty to more than 70,000 aerospace pension plan participants and their beneficiaries when it offloaded over $1.7 billion of its pension obligations to a “highly risky” annuity provider.

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On December 15, 2020, GE announced that it had agreed to use plan participants’ retirement assets to purchase a group annuity contract with Athene Annuity and Life Company and its subsidiary Athene Annuity & Life Assurance Company of New York—both of which make up a private equity-controlled insurance company with a “highly complex offshore structure and risky asset portfolio,” the 45-page lawsuit alleges.

The filing argues that GE’s decision violates the Employee Retirement Income Security Act (ERISA), a federal law that requires a plan fiduciary to act “solely in the interest” of plan participants and beneficiaries rather than in its self-interest. Part of that legal obligation, the complaint says, involves choosing the safest annuity available to ensure long-term financial security for pensioners.

“Despite clear evidence that Athene was substantially riskier than traditional annuity providers, [the] defendants placed GE retirees’ and their beneficiaries’ future retirement benefits at substantial risk of default—a risk for which they were not compensated,” the suit contends. “No prudent and loyal fiduciary under the circumstances would have transferred retirees’ pension benefits to Athene in a market with stable and established annuity providers.”

The case explains that should a pension plan underperform, employers are generally required under ERISA to make additional plan contributions to ensure retirees receive their benefit payments. In recent years, however, employers have increasingly sought to reduce their pension funding risk by offloading all or part of their pension benefit obligations to insurers, the lawsuit says. The insurance company is then solely responsible for paying participants’ pension benefits, the filing says.

The complaint stresses that these pension risk transfers cause pensioners to lose certain protections provided to them by ERISA and the Pension Benefit Guaranty Corporation (PBGC) as they are no longer considered plan participants. Per the filing, the PBGC is a federal agency that ensures retirees continue to receive their pension benefits should their plan become insolvent or terminated.

The case says that GE, on the other hand, has enjoyed saving more than $6 million each year since it stopped paying premiums to the PBGC around 2021. The company has also likely saved a substantial amount of money selecting Athene over the safest annuity available, the suit alleges.

“[The] defendants selected Athene not because doing so was in the interest of participants, their beneficiaries, and the security of their retirement benefits, but to advance corporate interests by saving GE money and enhancing corporate profits,” the complaint argues.

The General Electric Company aerospace pension plan lawsuit looks to represent all participants and their beneficiaries since December 15, 2020 for whom the responsibility for plan-related benefit payments has been transferred to Athene Annuity and Life Co. or Athene Annuity & Life Assurance Company of New York.

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