A legal effort to block Verizon's (NYSE: VZ) plan to convert pension obligations to an annuity, saying it would cause harm to retirees, was denied by a Texas court on Friday.
In a lawsuit filed on Nov. 27 by two Verizon retirees, William Lee and Joanne McPartlin, along with Plan Beneficiaries of the Verizon Management Pension Plan, said the conversion to an annuity would eliminate federal law protections. These protections include those provided by the Pension Benefit Guaranty Corporation (PBGC) and Employee Retirement Income Security Act (ERISA) protections. Verizon's Management Pension Plan currently has about 100,000 participants.
However, Sidney A. Fitzwater, a U.S. District Judge in Dallas, said in a 15-page opinion that the request by two Verizon retirees did not show "substantial likelihood of success on the merits" of their case.
"Plaintiffs have failed to establish a substantial likelihood that Verizon has a specific intent to interfere with their rights," Fitzwater wrote in his opinion on Friday. "They do not offer a rebuttal to Verizon's proffered legitimate, nondiscriminatory reasons for defining the group of retirees for the annuity contract."
Verizon in October announced a plan to transfer $7.5 billion in pension obligations for 41,000 pre-January 1, 2010 management retirees to insurer Prudential in a process that's called pension terminal funding.
At that time, Verizon said it expected the transfer to occur this month, with plans to put $2.5 billion into its pension plan before closing.
Verizon said in a statement on Nov. 29 that "The monthly pension benefits of the retirees receiving an annuity from Prudential will remain unchanged."
Prudential Financial Inc. (PRU), which is another defendant in the lawsuit, said in a Dec. 5 filing that the pensions will not be harmed and asked Fitzwater to "reject their request to block the transfer."
Curtis Kennedy, an attorney for the retirees, said that they were not given a say about how their pensions were being handled.
"Verizon's style was to do a 'cram-down,' giving retirees no say in the matter," Kennedy said in an e-mailed statement. Fitzwater's ruling will probably be appealed, the lawyer said.
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