Bristol-Myers faces lawsuit over $2 billion pension risk transfer to Athene

Bristol-Myers faces lawsuit over $2 billion pension risk transfer to Athene | Insurance Business America

Legal Insights

Bristol-Myers faces lawsuit over $2 billion pension risk transfer to Athene

Retirees claim the deal violated fiduciary duties

Legal Insights

By
Kenneth Araullo

Bristol-Myers Squibb Co is facing a class-action lawsuit related to a $2 billion pension risk transfer deal made five years ago with Athene Holding Ltd, which retirees claim violated fiduciary responsibilities.

The lawsuit, filed on Sept. 4 in the US District Court for the Southern District of New York, names Bristol-Myers, its pension plan, and State Street Global Advisors Trust Co as defendants. Athene is not listed as a defendant in the case.

According to a report from AM Best, retirees of Bristol-Myers allege that the transfer of their pension benefits removed the protections provided under the Employee Retirement Income Security Act of 1974 (ERISA), leaving them vulnerable to unpaid pensions.

The complaint alleges that Bristol-Myers, despite being valued at over $100 billion, chose to transfer its retirees’ pension obligations to an insurance company with a Bermuda-based subsidiary. The plaintiffs argue that this move jeopardized their retirement benefits.

The lawsuit claims that Bristol-Myers and State Street profited significantly from the deal, while retirees were left at risk. It further asserts that the transaction exposed retirees to potential non-payment of pensions in the future, as their benefits are no longer protected under federal law.

The deal in question, which took place in 2019, involved Bristol-Myers transferring its pension obligations through the purchase of group annuity contracts from Athene’s units, Athene Annuity and Life Company and Athene Annuity & Life Assurance Co of New York.

While ERISA allows pension obligations to be transferred to insurance companies, it also requires employers to select the safest available annuity provider, a standard the lawsuit alleges was not met by Bristol-Myers and State Street.

After the transfer, the responsibility for the retirees’ pension payments shifted away from Bristol-Myers, and those payments are no longer guaranteed by the Pension Benefit Guaranty Corporation (PBGC), according to the lawsuit. The plaintiffs also describe Athene as a “risk-taking” insurer involved in shadow banking activities.

The lawsuit highlights concerns that retirees are now solely dependent on Athene’s financial stability to ensure their pension payments.

A representative from Athene, in a written statement, described the lawsuit as a baseless attempt by class action attorneys to benefit financially. The statement said that Athene has always honored its pension obligations, stating that every participant covered by a pension group annuity has received and will continue to receive their promised benefits.

The representative said that Athene is properly capitalized and has gone through rigorous reviews by fiduciaries and independent advisers who specialize in assessing the financial safety of insurers.

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