US Department of Labor files amicus brief clarifying use of pension risk transfers to annuity providers

WASHINGTON – The U.S. Department of Labor today filed an amicus brief with the U.S. Court of Appeals for the Second Circuit, clarifying the business requirements for offloading defined benefit plan liabilities through pension risk transfers.

In the brief, filed in Doherty v. Bristol-Myers Squibb, No. 26-1021, the department reiterates the appropriate standards for pension risk transfers, also known as “derisking.” The brief explains the plaintiffs in this case argue that Bristol-Myers Squibb's choice of annuity provider for its pension risk transfer was not the safest available and resulted in a breach of fiduciary duty under the Employee Retirement Income Security Act.

ERISA gives employers the ability to manage their defined benefit pension obligations by transferring liabilities to an annuity provider, the department said. Noting that Congress intended for employers to rely on annuity providers to help manage the long-term obligations associated with defined benefit pension plans.

Today’s brief is the second on this topic from the department this year. In January, the department filed an amicus brief in Konya v. Lockheed Martin, clarifying the proper constraints and liberties that apply when a business decides to derisk by transferring its pension plan liabilities to an annuity provider.

The brief argues that pension risk transfers benefit both employers and beneficiaries when not disrupted and litigating business decisions can hinder or eliminate benefits. The department added that continued litigation could deter employers from derisking their plans and ultimately upset the balance Congress established between federal and state regulation.

According to the department’s brief, the plaintiffs in this case lack standing under ERISA to sue because they have received all the benefits they are entitled to and there is no evidence that those benefits are at risk. The brief also makes clear that only the plan sponsor has the authority to enter into a derisking transaction and reiterates longstanding department guidance for the fiduciary process.

Read the department’s amicus brief in Doherty v. Bristol-Myers Squibb.