Risk transfer litigation: on the same facts two district courts reach opposite conclusions

On March 28, 2025, two Federal District Courts decided cases in Athene-related risk transfer cases, reaching opposite conclusions on what is likely to be the key issue in this litigation: whether participants in defined benefit plans have standing to sue on a claim of an ERISA fiduciary breach with respect to a pension risk transfer when they are (currently) receiving all benefits promised under the plan from the annuity carrier (in these cases, Athene Annuity and Life Co. and Athene Annuity & Life Assurance Company of New York) to whom those benefits have been transferred.

The cases

The two cases are Camire, et al. v. Alcoa USA Corp., decided by the US Federal District Court for the District of Columbia, and Konya et al. v. Lockheed Martin Corporation, decided by the US Federal District Court for the District of Maryland.

The cases involve similar claims. Quoting Lockheed:

Plaintiffs allege that Lockheed violated its statutory and fiduciary duties when it "offloaded over $9 billion in pension obligations" due under the Plans causing "Plaintiffs' … [to lose] their status as 'participants' in … the ERISA-governed Plans." ... Plaintiffs allege that a fiduciary undertaking a PRT [pension risk transfer] transaction must obtain the "safest annuity available" under the dictates of [Department of Labor Interpretive Bulletin 95-1], but claims that Athene was far from it and was, for various alleged reasons, "substantially riskier than numerous traditional annuity providers." … Plaintiffs say Lockheed chose this riskier alternative to traditional annuity providers to save money at the expense of Plaintiffs' retirement safety. … Plaintiffs further claim that Athene is especially risky because it is "a private-equity controlled insurer with a highly risky offshore structure." … Plaintiffs allege that Lockheed breached its fiduciary duties by foregoing more appropriate, less risky annuities that were available. … Ultimately, Plaintiffs' complaint is best summarized as alleging that "Lockheed Martin sacrificed the retirement security of retirees and beneficiaries for corporate profits."

Standing to sue and the Supreme Court’s decision in Thole

The issue of standing to sue is likely to be the first ground over which the risk transfer battle will be fought.

The court in Camire granted defendant Alcoa’s motion to dismiss based on its finding that plaintiffs did not have standing to sue under Article III of the US Constitution because they had not suffered an “‘injury in fact’ that is ‘concrete and particularized’ as well as ‘actual or imminent.’”

The court relied heavily on the Supreme Court’s decision in Thole v. U.S. Bank N.A. (2020), holding that, “because Plaintiffs continue to receive their monthly benefit payments,” plaintiffs cannot “show that the transfer of their contractual rights [from Alcoa to Athene] concretely harmed them in some way.”

The Alcoa court noted a discussion in Thole, and raised by the Alcoa plaintiffs, of the possibility that a plaintiff might adequately allege a “concrete harm” where (quoting Thole) “the mismanagement of the plan was so egregious that it substantially increased the risk that the plan and the employer would fail and be unable to pay the participants’ future pension benefits.”

With respect to this theory-of-standing, the Alcoa court found that:

[T]he allegations in the complaint are comparative – focusing on why Athene is riskier than other annuity providers … – rather than absolute. Plaintiffs do not allege that Athene is at a high risk of failure—just that it is at a higher risk of failure than other annuity providers. While these allegations, accepted as true, may suffice to establish “a substantially increased risk of harm,” they fail to show “a substantial probability of harm with that increase taken into account.”

[T]here are several events that would need to take place before Plaintiffs could ever experience the harm they are concerned about. First, Athene would need to fail, which means that it would have to (1) “suffer[] catastrophic losses;” (2) “fail[] to sufficiently mitigate any such losses to preserve Plaintiffs’ benefits;” and (3) fail “to secure alternative funding sources.” … Then, Plaintiffs would need to have benefits that actually exceed the amount that their SGAs [state guaranty associations] cover, which is over $250,000 in most states. … Finally, Athene’s accounts would need to be underfunded or insufficient to cover participants’ losses in the event of failure. … Because Plaintiffs’ allegations do not plausibly suggest that this “highly attenuated chain of possibilities” is likely, … the court cannot conclude that any harm to Plaintiffs is “certainly impending,”

On this basis, the court concluded plaintiffs had not shown a “substantially increased risk that the plan and the employer would fail and be unable to pay the participants’ future pension benefits,” and that, therefore, they did not have standing to sue. It therefore granted defendants’ motion to dismiss.

The Konya court reached the opposite conclusion

The Konya court – reviewing the same issue and quoting the same discussion in Thole – came to the opposite conclusion, stating that:

Faithfully applying Thole, the relevant question is not one centering on whether Plaintiffs are currently receiving their expected benefits (they unquestionably are), but rather one that asks whether they have adequately alleged that Lockheed's transfer of the Plans to Athene represents "mismanagement ... so egregious that it substantially increased the risk that [Plaintiffs' retirement plan] would fail and be unable to pay the participants' future pension benefits." … The Court believes that at this early stage, Plaintiffs have adequately alleged facts, if only barely so, sufficient to conclude there is "a substantially increased risk" that Athene will fail and Plaintiffs' will suffer harm because of it. … As such, the Court finds they have eked out sufficient injury-in-fact to establish standing.

In reaching this conclusion, the Konya court noted plaintiffs’ discussion of/allegations with respect to:

“Athene's relationship with the entity responsible for the collapse of Executive Life … highlight[ing] the importance of choosing a safe annuity provider.”

The potential significance of the offshore location of Athene’s reinsurance subsidiary, “where [regulatory] oversight is less stringent.”

Research of a “forensic accountant and certified fraud examiner” noting the risks associated with private equity ownership of entities that provide retirement benefits, as is the case with Athene. “Plaintiffs allege that ‘[t]he mission of private equity does not align with the best interests of policyholders’ and presents an unsustainable business model in the annuity space… They claim that private equity firms benefit from premium cash flows and generate significant fees through investment management, with their investments primarily aimed at financing their own businesses.”

There were other issues in this case – but the decision on standing was the critical one. On the basis of the analysis above, the Konya court allowed plaintiffs to proceed to discovery.

Takeaways

To state the obvious: we have two courts looking at the same facts and reaching different, opposite conclusions. This contradiction will only be resolved by further litigation in one or both of these cases.

But the key takeaway for sponsors is that, at least one federal court is prepared to let these risk transfer cases survive a motion to dismiss, a possibility that many sponsors will want to make part of their risk transfer decision process.

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We will continue to follow this issue.