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Savings & Retirement
The Employee Retirement Income Security Act (ERISA) is a federal statute enacted in 1974 that regulates employee benefit plans to protect employees’ savings and retirement. 29 U.S.C. §§ 1001-1461. Strong enforcement of ERISA is needed now more than ever, given the increasing number of older Americans unable to meet their expenses in retirement.
Central to ERISA’s mission is the heightened fiduciary duties of loyalty and prudence imposed on those responsible for managing savings and retirement plans. 29 U.S.C. § 1104(a)(1). These include defined benefit plans, where retirees receive a fixed monthly pension payment for life that does not fluctuate with the plan’s investment performance. ERISA ensures that retirees receive the benefits they have earned, even when an employer decides to terminate the pension plan. When an employer terminates a pension plan, it may satisfy its remaining obligation by purchasing an annuity from a private insurer that assumes responsibility for making future benefit payments, a transaction known as a pension risk transfer (PRT). Recent federal appellate court cases examine when, if ever, retirees can sue employers that allegedly breach their fiduciary duties by selecting financially risky insurers, thereby jeopardizing retirees’ retirement security.
Employers’ substitution of a PRT for a defined pension benefit plan can have serious downsides. Employers have financial incentives to buy cheap annuities posing greater risk to beneficiaries (e.g., lower credit rating, riskier assets), since the company retains unpaid assets greater than the PRT’s costs. Moreover, employees switched to PRTs are no longer protected by ERISA’s robust statutory scheme of legal and financial protections. For example, ERISA imposes fiduciary obligations and stringent reporting and funding requirements on pension plans and, when a plan fails, protects against discontinuation of payments via federal insurance from the Pension Benefit Guaranty Corporation. In contrast, private annuity funds can be held in state or offshore jurisdictions with lax regulations and be funded by unclear financial transactions that make it challenging to verify the PRT’s financial health. And if an insurer fails, pensioners can face months or years of delays before a patchwork of state guaranty associations steps in to assist. Even then, retirees may end up receiving less than they expected. These risks have led retirees to sue their former employers for breach of fiduciary duties, alleging that they were switched to cheap, risky annuity providers instead of ones offering a safe annuity that would secure their retirement assets. To protect themselves, retirees have asked courts to require the posting of security to guarantee that funds will be available for their retirement even if the annuity fails. See 29 U.S.C. § 1132(a)(9).
In addition to defending the merits of these cases, employers argue that former pensioners cannot bring these lawsuits because they have not suffered a legally recognizable injury. Employers often rely on Thole v. U.S. Bank, N.A., in which the Supreme Court held that participants in a defined benefit plan could not sue over alleged mismanagement of pension funds because they continued to receive their full pension benefits and therefore had not suffered a concrete personal injury. 590 U.S. 538, 538-39 (2020). Employers claim that the same principle applies to PRTs—because the annuity provides participants with a monthly check for the same amount as the pension payment, there is no injury. In response, retirees contend that the PRT itself causes a legally cognizable injury because it increases risk of future financial loss and strips them of ERISA protections, allowing them to bring suit.
Recognizing retirees’ right to sue following a PRT is critical because challenges to the transfer itself are subject to ERISA’s six-year statute of limitations. If an employer selects an annuity that presents a foreseeable risk of failure, but that risk does not materialize until more than six years after the transfer, retirees may be left with no legal remedy against the employer that chose it. A contrary rule would effectively insulate fiduciaries from accountability for imprudent annuity selections, leaving retirees to bear the consequences of those decisions and undermining the retirement security that ERISA was enacted to protect.
Cases raising this issue have been filed in several jurisdictions, and courts have been divided on whether retirees may sue immediately following a PRT. The issue is now before three federal appellate courts. The U.S. Court of Appeals for the Fourth Circuit is considering the question in Konya v. Lockheed Martin Corp., No. 25-2061 (4th Cir. 2025). AARP and AARP Foundation filed an amicus brief in the Konya case, arguing that the loss of ERISA protections is, in and of itself, the kind of harm that allows pensioners to sue. Past high-profile annuity failures provide ample proof.
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In addition, the Second Circuit is considering the issue in Doherty v. Bristol-Myers Squibb Co., No. 26-1021 (2d Cir. 2026), a case in which the court recognized retirees’ standing to bring suit. By contrast, the U.S. Court of Appeals for the District of Columbia is also reviewing Camire v. Alcoa USA Corp., No. 26-7035 (D.C. Cir. 2026), in which the district court held that retirees lacked standing. AARP and AARP Foundation filed an amicus brief in this case, making the same arguments it made in Konya. The growing circuit split here strongly suggests that Supreme Court review will be sought in coming years.
David Yellin, DYellin@aarp.org
2026 Supreme Court Preview
The Supreme Court often hears cases affecting the lives of people over 50. Read our review of key cases coming before the Court this year and likely to come in the future.