Verizon Communications on Monday completed the purchase a single premium group annuity contract from the Prudential Insurance Company of America for $7.5 billion in pension liabilities, after a federal judge last week denied a request by Verizon retirees to block transaction.
Verizon, in a filing with the Securities and Exchange Commission, said it expects to record a significant charge in the fourth quarter of 2012 as a result of the transaction. The company said it contributed an aggregate of approximately $2.6 billion to the plan since Sept. 1, 2012, in conjunction with the transfer.
On Nov. 27, an association representing Verizon management retirees filed a federal lawsuit seeking an immediate temporary restraining order to block the telco’s plan to transfer 41,000 employee pension accounts. The Association of BellTel Retirees alleged that the transfer would violate the federal Employee Retirement Income Security Act of 1974.
On Friday, Dec. 7, U.S. District Court Judge Sidney Fitzwater of the Northern District of Texas denied the request, noting that the plaintiffs “failed to carry their burden of showing a substantial likelihood of success on the merits.”
“Plaintiffs have not shown that any part of the proposed transaction violates the requirements of [Verizon’s pension plan] because the annuity contract will provide for the continued payment of the participants’ pension benefits in the same form and amount that was in effect under the Plan immediately before the annuity purchase, with the same rights to future benefits,” Judge Fitzwater wrote in the decision.
However, according to attorney Curtis Kennedy, who represented the plaintiffs, the ruling will "most likely" be appealed. "Therefore, while we could not immediately stop the Verizon/Prudential annuity transaction from going forward... all of the parties may, eventually, be faced with a need to unwind some of the deal,” Kennedy said in a statement provided by the Association of BellTel Retirees.
Kennedy also said that “the Verizon management retirees, while not immediately losing dollars and cents, will immediately be losing all of the federal law protections, and they should have been allowed a voice and choice with respect to the planned change."
Verizon was represented in the matter by lead counsel Covington & Burling with Dallas-based Jones Day as co-counsel. Prudential joined Verizon in opposing the injunction and was represented by O’Melveny & Meyers.