NEW YORK – A federal judge in Texas on Friday denied Verizon Communications Inc retirees' attempt to stop the company from transferring $7.5 billion in pension obligations to insurer Prudential Insurance Co of America.
The ruling from U.S. District Judge Sidney Fitzwater clears the way for Verizon to proceed with the move, first announced in October, in which Verizon would purchase a group annuity contract where Prudential would be responsible for paying retirees' pensions. The transfer is scheduled to close December 10.
On November 27, two management retirees affected by the move filed a lawsuit in Texas federal court, seeking a court order blocking the transfer.
They argued in court filings that the move would strip them and approximately 41,000 other affected employees of their federal legal protections and interfere with their rights under the retirement plan.
Fitzwater rejected their request for a temporary restraining order and preliminary injunction. He wrote in a 15-page ruling that "plaintiffs have failed to carry their burden of showing a substantial likelihood of success on the merits."
A lawyer for the plaintiffs, Curtis Kennedy, said that the retirees "should have been allowed a voice and a choice with respect to the planned change." He said the plaintiffs are considering an appeal.
A Verizon spokesman said the company was pleased with the decision. A spokeswoman for Prudential declined to comment.
Also known as pension terminal funding, the concept of the deal is simple: an employer pays an upfront premium to an insurance company for an annuity that covers the members of a pension plan.
The insurer becomes responsible, via the annuity, for all of the retirees' pensions and the sponsor gets to wash its hands of the obligation.
General Motors Co completed a similar deal with Prudential earlier this year.
The case is Lee et al. V. Verizon Communications Inc., in the U.S. District Court for the Northern District of Texas, no. 12-4834.
(Reporting by Jessica Dye; editing by Carol Bishopric)