U.S. defined benefit plan sponsors have been eager to explore
de-risking options to control asset volatility and remove pension
liabilities from their balance sheets. A report jointly issued
on June 25 by the consulting firm Mercer and CFO magazine indicates
that nearly half of respondents are considering
annuitization at this time.
Even though annuitization of pensions is a long-standing
practice under the U.S. Employee Retirement Income Security Act
(ERISA), a cloud has been hanging over de-risking planning as a
result of a lawsuit filed against Verizon by retirees challenging
the annuitization of their pensions through Prudential. Among the
various legal claims asserted are that the transaction violates
ERISA by ending PBGC insurance protection for the retirees,
discriminates against them, and that the possibility that pensions
would be annuitized was not described in the summary plan
description, the basic plan disclosure document for participants
under ERISA.
