Defined Benefit Plan Litigation

We represent employee groups in defined benefit plan litigation in three categories: (1) challenging fiduciary conduct that risks default of the entire plan, (2) contesting pension risk transfer (PRT) and (3) contesting plan termination.

Pension Risk Transfer (PRT)--Transfer Assets to Insurance Company

defined benefit plan litigation

In today’s environment (2023) many employers are trying to avoid pension obligations by transferring risk of the company’s defined benefit plan to an insurance company.  The insurance company thereafter creates an annuity for future payments. The keys to protecting assets during a risk transfer to an insurance company is to focus on valuation of the plan assets and carefully evaluate for self-dealing. It is axiomatic that large money transfers allow for skimming and excessive fees.  The US Department of Labor has published a guideline for evaluating PRTs–known as Guideline 95-1.


Plan Termination--Transfer Assets to PBGC

defined benefit plan litigation

Transfer of defined benefit plan assets to the Pension Benefit Guaranty Corp. (PBGC) means that your pension plan has failed and can no longer provide the benefits you were promised by your employer.  Importantly, PBGC has a complex formula for paying benefits–but benefits paid by PBGC are never as high as provided in the original pension plan.  So it is in your interest to prevent a plan transfer for PBGC, if possible.  Due diligence and litigation can, and often does, help.


Non-Union Legal Representation

Protecting plan participants in a defined benefit plan is typically a union’s responsibility, in the first instance. But we have seen too many cases where the union missed the mark on valuation and termination issues concerning a defined benefit plan. Working directly for employee groups, outside the union structure, we can better protect employees and employee plans by achieving a greater plan valuation than was thought possible.

Article III Standing

Before evaluating any lawsuit challenge to a defined benefit plan, we must first be satisfied that the plaintiff has legal standing to file the case.  “Standing” requires a plaintiff to have as tangible stake in the case, not a theoretical one. See our blog for a discussion of the standing issue. This requirement exists even if a plaintiff seeks class representation, attempting to enforce fiduciary breaches on behalf of the plan.

However, a lawsuit challenging plan-wide fiduciary breaches may be granted legal standing, if activities of the fiduciary are creating or enhancing the risk of plan default. Under a motion to dismiss, plaintiff must demonstrate that the risk of plan default is plausible, not just possible.



What is Pension Risk Transfer?

Pension Risk Transfer (PRT) is the off-loading of existing pension responsibilities (risk) to an insurance company in connection a company’s termination of its defined benefit plan for its employees.

Is it Legal for a Company to Terminate its Defined Benefit Pension Plan?

Yes. Under ERISA, a company (Plan Sponsor) is allowed to terminate its defined benefit pension plan, so long as it provides for payment of non-forfeitable (vested) benefits that have accrued under the plan.

Are there Legal Constraints on a Pension Risk Transfer?

Yes. A Plan Fiduciary must abide by the standard ERISA fiduciary duties in termination of a defined benefit plan and replacing it through purchase of an insurance contract or annuity. See, discussion of ERISA fiduciary duties, here.


Have Questions about your Pension or Benefits Plan?