Overview

As of the date of this writing, 13 putative class action cases (with three of those cases later consolidated) have been filed against plan sponsors, fiduciaries, and, in some cases, independent fiduciaries, challenging pension risk transfers (PRTs), either in the context of a lift-out of a portion of the plan’s liabilities, or a full plan termination.  In these cases, plaintiffs generally bring fiduciary breach and prohibited transaction claims.  In all but two of those cases, defendants filed motions to dismiss, and motions are expected in the other two cases. 

So far, five district courts have issued decisions on the motions to dismiss, plus a Report & Recommendation (R&R) from a magistrate court (which has not yet been ruled on by the district court).  While three of those decisions, plus the R&R, granted defendants’ motions to dismiss – a favorable scorecard for plan sponsors and fiduciaries – the grounds on which the motions were granted or denied could provide insight into the trajectory of these cases going forward, including a possible circuit split for the Supreme Court to address.  Below are the key takeaways from the decisions to date. 

Common Arguments in Motions to Dismiss

While the arguments in each of the defendants’ motions to dismiss vary, and we do not discuss all of them here, there are several arguments that are central to each of the motions. 

First, defendants generally argue that the plaintiffs lack constitutional standing to bring the claims.  Constitutional standing requires, among other things, an injury in fact that is “concrete and particularized” and “actual or imminent”.  Defendants argue that no plaintiff is receiving any benefit less than what he or she is entitled to under the terms of the plan, and any allegation that plaintiffs have been harmed by the PRT is entirely speculative, not based on any concrete or imminent threat of harm.  Additionally, defendants argue that any harm is not the result of a fiduciary action, but the settlor decision to pursue a PRT or, alternatively, the action of the independent fiduciary’s selection of the annuity provider.

Second, defendants generally argue that the plaintiffs fail to state a claim for breach of fiduciary duty.  With respect to the breach of fiduciary duty claims, defendants argue that the decision to pursue a PRT is a settlor, and not fiduciary, decision.  Additionally, defendants argue that the decision was not made by the normal plan fiduciaries (in the case where an independent fiduciary was used) and, in any event, the plaintiffs failed to allege any deficiencies in the fiduciary process.  With respect to breach of loyalty claims, defendants argue that plaintiffs failed to allege the applicable fiduciary improperly benefited from or had any non-speculative interest in the service provider being selected (whether it be the independent fiduciary or the annuity provider).

Finally, defendants argue that plaintiffs fail to state a claim that defendants engaged in a prohibited transaction with the annuity provider because the insurer is not a party in interest for the purpose of ERISA section 406 because it does not provide services to the plan; rather, the insurer simply sold annuity contracts to the plan.  Additionally, defendants argue that the insurer was not a party-in-interest prior to the PRT transaction. Post-Cunningham v. Cornell, defendants’ arguments regarding applicability of prohibited transactions exemptions would not succeed at the motion to dismiss stage. 

The Decisions at a Glance

• Konya v. Lockheed Martin (D. Md., Mar. 28, 2025). The court denied the motion to dismiss, holding that the plaintiffs’ allegations as to the increased default risk and diminished present value sufficed for injury, “if only barely so”.  The court also ruled the fiduciary‑breach, prohibited‑transaction, and monitoring claims could proceed, holding the plaintiffs made sufficient allegations of an implied lack of prudent process and self-dealing, among other things.
• Camire v. Alcoa (D.D.C., Mar. 28, 2025). The same day as the decision in Lockheed Martin was issued, the court dismissed this complaint for lack of standing, noting that the plaintiffs have received all benefits to which they are entitled under the plan.  The court held that allegations that the insurer was comparatively riskier without allegations of substantial probability of default or other imminent harm were insufficient for constitutional standing. 
• Piercy v. AT&T (D. Mass., Sept. 30, 2025).  While the court found the plaintiffs had standing due to the allegedly riskier annuities purchased through the PRT, the court dismissed the fiduciary breach claims for failure to plausibly allege that a prudent fiduciary “could not have” selected the same insurer, particularly given the separate‑account protections provided in the PRT.  The court also dismissed the prohibited transaction claims, holding that there were no allegations that either the independent fiduciary or the annuity provider were “parties in interest”. 
• Doherty v. Bristol‑Myers Squibb (S.D.N.Y., Sept. 29, 2025). The court held that the plaintiffs have standing because of the allegations that they are at substantial risk of not receiving their benefits due to the allegedly risky annuity provider, and also noted the loss of ERISA’s protections following the annuity purchase.  The court allowed certain of the fiduciary breach claims to proceed, but dismissed prohibited transaction claims involving the annuity provider on the grounds that it was not providing services to the plan.  The court also dismissed prohibited transaction claims involving the plan sponsor for taking a reversion following the annuity purchase because a sponsor generally is permitted under law to take a reversion following plan termination.
• Bueno v. General Electric (N.D.N.Y., Sept. 24, 2025). The court dismissed the claims for lack of standing, holding that there are no allegations that plaintiffs have not received their full benefits, and loss of PBGC coverage is not a harm caused by any fiduciary action.   
• Schoen v. ATI, Inc. (W.D.PA, Oct. 7, 2025 Report & Recommendation). The magistrate judge recommended granting both defendants’ motions to dismiss for lack of standing, finding that the plaintiffs failed to allege a concrete, actual, or certainly impending injury.  The judge noted that plaintiffs do not dispute they are receiving all their benefits, and that there were no allegations that the annuity provider was at a high risk of failure. 

Key Takeaways From Decisions So Far

1. Courts Split On the Issue of Standing

Lack of standing is a quick way to achieve dismissal of a lawsuit, and the defendants focus heavily on the plaintiffs’ arguable lack of harm from a PRT.  Courts are split on whether allegations that plan participants were moved to a materially riskier payor are enough to constitute injury-in-fact.  The Lockheed Martin, AT&T, and Bristol-Myers Squibb courts each found that allegations – accepted as true for the purpose of deciding the motion to dismiss – that the annuity provider might fail in the future present an immediate, redressable injury caused by the defendants’ actions.  Interestingly, the Bristol-Myers Squibb courteven found the loss of PBGC protection could support standing – a fact that is present in all PRTs. 

The Alcoa, General Electric, and ATI, Inc. R&R courts required more – not only an increased risk, but a substantial probability of harm.  These courts found relevant that there were no allegations that plaintiffs were not receiving all of their benefits, and also note that the loss of PBGC coverage was the result of a settlor decision, not fiduciary action.   

It is notable that it appears both the Lockheed Martin and AT&T courts struggled with the issue of standing.  The Lockheed Martin judge wrote that the plaintiffs had “eked out” sufficient allegations of injury to support standing.  And the AT&T court said standing was a “close question”.  Both the district court and the Fourth Circuit have granted interlocutory appeal with respect to the Lockheed Martin decision, so (absent a settlement) we should get circuit court law on the issue of standing in the near term.  In the longer term, a circuit split may set the stage for the Supreme Court to weigh in on the standing issue.

2. Courts Differ On What Is Required To Support Fiduciary Breach Claims

Generally, the plaintiffs in these cases bring claims for breach of the fiduciary duties of loyalty and prudence.  Some courts (such as Bristol-Myers Squibb and Lockheed Martin) at the motion to dismiss stage accept inferences of an imprudent process or disloyalty based on allegations of the annuity provider’s riskiness or other interests of certain of the defendants in other parties (such as the alleged interest of the independent fiduciary in the plan sponsor).  However, other courts require more.  The AT&T court in particular requires plaintiffs to sufficiently plead that a prudent fiduciary could not have made the same decision being challenged, and that showing requires making allegations as to all relevant facts, not just cherry-picking facts helpful to plaintiffs while ignoring those that may not be helpful.  

3. Courts Generally Require A Preexisting Relationship to Support Prohibited Transaction Claims, and Are Skeptical the Annuity Provider Provides Services to the Plan

Post-Cunningham, plaintiffs need not plead exceptions, but they must still plead facts that bring a transaction within ERISA section 406’s prohibitions in the first instance.  Many courts require some kind of pre-existing relationship between the plan and the alleged party-in-interest.  This means that the fact that a party (such as the independent fiduciary or the annuity provider) has a pre-existing relationship with the plan sponsor, for instance, is irrelevant for party-in-interest status if there is no allegation of a pre-existing relationship with the plan.  And several courts question or outright reject that the annuity provider can be a party-in-interest simply for selling annuities to the plan, as such a sale does not constitute providing services to the plan.   

The Court in Lockheed Martin allowed prohibited transaction claims to proceed on ERISA section 406(b) “self‑dealing” theories, not on ERISA section 406(a) “party‑in‑interest” theories.  In this case, the judge emphasized that plaintiffs need only plausibly allege that a fiduciary dealt with plan assets for its own interest or on behalf of an adverse party, and that any statutory exemptions are affirmative defenses that need not be negated at the pleading stage.  The Court also credited concrete, nonconclusory allegations of conflicted decision‑making and unjust gains to let ERISA section 406(b) claims move forward. 

By contrast, where plaintiffs pursued ERISA section 406(a) claims based on dealings with a “party in interest,” courts have typically required a pre‑existing service relationship with the plan itself and have rejected the idea that a one‑off sale of an annuity product, or corporate relationships with the plan sponsor or its affiliates, suffice.  On that question, the emerging consensus is that a pre‑existing relationship with the plan is required to plead party‑in‑interest status; courts routinely dismiss ERISA section 406(a) claims where the complaint does not plausibly allege that relationship.

Practical Implications for Plan Sponsors and Fiduciaries

            While it is not possible for plan sponsors and fiduciaries to completely insulate themselves from a lawsuit, there are several practical takeaways for plan sponsors and fiduciaries considering or undertaking a PRT.  

• Separate settlor and fiduciary actions.  Ensure that all settlor actions – such as the decision to pursue the PRT and any necessary plan amendments – are completely separate from the fiduciary action implementing the settlor decisions. 
• Consider pre-existing relationships.  When selecting an independent fiduciary (if using one) or an annuity provider, consider any pre-existing relationships or interests between or among the plan, the sponsor, and the other party, and, if appropriate, document why such relationship is not a concern.
• When selecting an annuity provider, consider all relevant factors. Generally, plan fiduciaries will consider the factors set out in Department of Labor Interpretive Bulletin 95-1, but typically additional factors are considered.  Plan fiduciaries should engage a consultant if necessary to assist with the analysis.
• Document, document, document.  Clearly document all decisions throughout the PRT process.  Ensure that the settlor decision to pursue a PRT is completely separate from any fiduciary actions and decisions.  Document the normal plan fiduciary’s decision to engage an independent fiduciary (if using one), and consider any pre-existing relationship.
• Communicate protections to participants. Take time to clearly communicate with participants impacted by the PRT, explaining the process, the implications, and the outcome.  Consider things like FAQs, town halls, or office hours to field any questions.  

We will continue to monitor developments in these cases.  If you have any questions, please contact your Thompson Hine attorney.