Covington & Burling served as ERISA counsel to Verizon Communications Inc. on its transfer of $7.5 billion in pension liabilities to The Prudential Insurance Company of America.
Many sponsors of defined benefit plans, especially frozen plans, are considering ways to “de-risk” by reducing or eliminating the volatility associated with their pension obligations for financial accounting and pension funding purposes. Ford and GM announced de-risking transactions earlier this year involving lump sum offers to retirees and, in the case of GM, a plan termination.
Verizon has taken yet another approach to pension settlements. The company’s management pension plan will purchase a group annuity contract under which an insurance company, instead of the plan, will pay retirees’ pensions. Retirees will not be required to make any choices: they will continue to receive the same pensions, in the same form, from the insurance company. Verizon’s pension transfer is expected to close in December of this year.
The Covington team was led by Amy Moore and Robert Newman, with assistance from Scott Smith, Len Chazen, Gus Caywood, Kendra Roberson, Grace Ristuccia, Christen Sewell, Jenna Wallace and Spencer Walters.
