Retirees allege the agreement violated their fiduciary duties.
Bristol-Myers Squibb Co is facing a class-action lawsuit over a $2 billion pension risk transfer agreement negotiated with Athene Holding Ltd five years ago, which retirees allege violated fiduciary duties.
The action, filed on September 4 in the United States District Court for the Southern District of New York, names Bristol-Myers, its pension plan, and State Street Global Advisors Trust Company as defendants. Athene is not named as a defendant in this case.
According to a report by AM Best, Bristol-Myers retirees claim that the transfer of their pension benefits lacked the protections afforded by the Employee Retirement Income Security Act of 1974 (ERISA), leaving them subject to unpaid benefits.
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 alleges that Bristol-Myers and State Street gained considerably from the transaction, while retirees were put at risk. It further claims that the deal exposed retirees to eventual nonpayment of pensions because their benefits are no longer guaranteed by federal law.
The 2019 transaction involves Bristol-Myers shifting its pension responsibilities by purchasing group annuity contracts from Athene’s divisions, Athene Annuity and Life Company and Athene Annuity & Life Assurance Co of New York.
While ERISA allows pension obligations to be moved to insurance firms, it also requires employers to choose the safest possible annuity provider, which the lawsuit claims Bristol-Myers and State Street did not do.
Following the transfer, Bristol-Myers lost responsibility for the retirees’ pension payments, which are no longer guaranteed by the Pension Benefit Guarantee Corporation (PBGC), according to the lawsuit. The plaintiffs further describe Athene as a “risk-taking” insurer that engages in shadow banking activities.
The case raises worries that pensioners are now exclusively reliant on Athene’s financial health to meet their pension obligations.
In a written statement, an Athene spokeswoman branded the case as a frivolous attempt by class action attorneys to profit financially. According to the statement, Athene has always fulfilled its pension responsibilities, claiming that every participant covered by a pension group annuity has received and will continue to receive the promised benefits.
The representative stated that Athene is appropriately capitalised and has undergone thorough assessments by fiduciaries and independent consultants who specialise in evaluating insurers’ financial safety.
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