The Supreme Court is being petitioned to review a claim thatcould clarify when participants in defined benefit pension planshave a right to sue sponsors under the Employee Retirement Income SecurityAct.

The case, Pundt v. Verizon, derives from the landmarkcase, Lee v. Verizon, which challenged the $8.4 billionpension buyout contract the telecommunications giant purchased fromPrudential in 2012.

Last August the 5^th Circuit Court ofAppeals upheld a lower court ruling in favor ofVerizon. Participants had alleged the buyout annuity violated ERISAon several grounds.

The original claim against Verizon was brought by two classes ofplaintiffs: the transferee class, the group of 41,000 retireeswhose pension obligations were moved to Prudential; and thenon-transferee class, the group of 50,000 participants with pensionobligations that remain on Verizon’s books.

Now, the Supreme Court is being asked to reviewonly those claims brought by the non-transferee class.

That class alleged that the $1 billion in plan assets thatVerizon used to pay fees to Prudential and others in the deal wereexcessive and unreasonable, and therefore a breach of ERISA.

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Originally, the district court dismissed that claim on thegrounds that the plaintiffs’ allegations lacked merit under ArticleIII of the Constitution. The 5^th Circuit upheld thatdecision.

Article III requires plaintiffs to show injury, and therelationship between the accused’s actions and the injury.

In its ruling, the 5^th Circuit made a distinctionbetween how fiduciaries’ misconduct harms participants in definedcontribution and defined benefit plans.

In defined benefit plans, alleged fiduciary mismanagement mightnot actually harm participants if those actions don’t cause theplan to fail.

“Constitutional standing for defined benefit plan participantsrequires imminent risk of default by the plan, such thatparticipants’ benefits are adversely affected,” wrote the5^th Circuit.

And that was not the case with Verizon de-risking deal, theappellate court reasoned in dismissing the case.

The plaintiffs argued that immediately after the buyout deal,the plan was $2 billion underfunded, and was only funded at 66percent of its future obligations.

But that did not result in any direct harm to participants, asthe plan continued to operate and maintain its future obligationsto retirees.

In its petition for the Supreme Court to consider the case,attorneys for plaintiffs note the “circuit disarray” preceding thecase.

Five circuit court decisions have ruled on the question ofdefined benefit participants’ Article III standing in bringingfiduciary claims without proving actual injury to participants.

Each court argued different requirements for Article IIIstanding, claim the plaintiffs.

If the Supreme Court fails to step in and clarify, thenparticipants’ course of action will vary by region of the country,and not the “unified national standards” intended by ERISA.

The Pension Rights Center has filed an amicus briefin support of the plaintiffs.

“ERISA’s core goal is spelled out in its title: employeeretirement income security,” states the Pension Rights Centerbrief.

“Resolution of the issues in this case is enormously important,as it potentially affects the retirement income security ofmillions of plan participants. Too much protection is given tofiduciaries, and insufficient protection to participants andbeneficiaries, when a participant in a defined benefit plan isrequired to show loss to individual benefits in order to havingstanding,” it said.