Pension risk transfer cases test Supreme Court’s Thole decision 

November 14, 2025

Courts presiding over the recent spate of lawsuits challenging defined benefit (DB) plan pension risk transfers (PRTs) have issued mixed rulings on whether plaintiffs can proceed with their ERISA claims. No court has yet ruled on the validity of the plaintiffs’ allegations in these cases. Instead, courts in five cases have focused on whether the plaintiffs have alleged a concrete injury that gives them standing to sue under Article III of the US Constitution. In two cases, the courts granted the defendants’ motions to dismiss on the grounds the plaintiffs lacked standing. In the other three cases, the courts concluded the plaintiffs had standing; however, one court still dismissed its case on other grounds.

In all five cases, the courts considered the plaintiffs’ standing to sue in light of the US Supreme Court’s 2020 ruling in Thole v. US Bank NA. In that decision, the closely divided court held that DB plan participants generally lack standing under Article III when an alleged fiduciary breach hasn’t affected their benefits. The decision has generally been viewed as setting a high bar for standing in ERISA litigation involving DB plans. However, lower courts considering PRT cases are now confronting an issue the high court left unresolved in Thole: Whether DB plan participants can establish standing by alleging that a fiduciary breach has put their future benefits at increased risk.

The plaintiffs in Thole were DB plan participants and beneficiaries who alleged that plan fiduciaries breached their ERISA duties by mismanaging plan assets. They claimed the plan fiduciaries’ allegedly imprudent investment decisions resulted in $750 million in losses to the plan, causing the plan to be underfunded for a period of time. The plaintiffs sought to have the plan made whole for these losses and asked the court to remove the allegedly imprudent fiduciaries.

In a 5–4 ruling, the Supreme Court held that the plaintiffs lacked Article III standing to bring their case. The Court explained that, although ERISA gives the participants a statutory right to sue for a fiduciary breach, Article III still requires them to show they suffered an “injury in fact” for which a court can provide relief. The Court concluded the plaintiffs failed to establish any injury in fact because they had received all their pension benefits despite the fiduciaries’ allegedly imprudent investment decisions, and the outcome of the case would have no impact on the plaintiffs’ rights to receive future benefits.

In a nonbinding portion of the Thole opinion, the Supreme Court discussed whether DB plan participants might have standing if mismanagement of a plan were so egregious that it substantially increased the risk that the plan and sponsor would fail and be unable to pay benefits. The Court declined to answer the question because the plaintiffs in Thole never claimed the plan or sponsor were at risk of failing. However, in a footnote, the Court suggested that even if fiduciaries mismanaged a DB plan into termination, participants still might not have standing if their benefits were fully guaranteed by the Pension Benefit Guaranty Corporation (PBGC).

ERISA’s fiduciary standards of prudence and loyalty apply to the selection of an annuity provider when a plan sponsor decides to outsource pension risk. Department of Labor guidance in Interpretive Bulletin (IB) 95-1 (29 CFR § 2509.95-1) says that to meet these standards the plan fiduciary “must take steps calculated to obtain the safest annuity available, unless under the circumstances it would be in the interests of participants and beneficiaries to do otherwise.” Once participants’ benefits have been annuitized, they are no longer subject to ERISA’s funding requirements or guaranteed by the PBGC (state guaranty associations offer some protection in the event the annuity provider fails but typically at lower levels than the PBGC).

Multiple lawsuits filed over the last 18 months have alleged that DB plan fiduciaries violated their ERISA duties by purchasing group annuity contracts in PRT transactions that provided cost savings to the sponsors but weren’t the safest available. The plaintiffs allege this injured them by increasing the risk that they will not receive their full retirement benefits, which were no longer protected by ERISA and the PBGC after the transaction. As a remedy, the plaintiffs have generally asked courts to order the sponsor to return the alleged cost savings and post additional security to ensure participants receive their full retirement benefits in the event of the insurer’s default.

Like the plaintiffs in Thole, the plaintiffs in all five PRT lawsuits where courts have issued decisions have continued to receive their full benefit payments after the transactions. The main question before the judges in these cases relates to the nonbinding portion of the Thole decision — i.e., whether the plaintiffs’ allegation that the transfers put their future benefits at increased risk is sufficient to establish an injury in fact for Article III standing.

The two judges that granted motions to dismiss concluded the plaintiffs’ general allegations about increased risk to future benefits were insufficient to support standing. They found that the plaintiffs didn’t satisfy the injury-in-fact requirement because the alleged increased risk of future harm to their benefits was not actual or imminent. These rulings suggest that plaintiffs must plausibly allege the insurer is at a high risk of defaulting on benefit payments to support standing based on claims of increased future harm.

However, the three other judges viewed the allegation of an increased risk to future benefits as sufficient to demonstrate standing, with no need for plaintiffs to also allege that the insurer’s default is imminent. In reaching this conclusion, the judges also gave weight to the fact that the plaintiffs lost protections under ERISA and the PBGC after the transaction.

These mixed rulings — all of which have come in the early stages of litigation — give no clear sense of whether general allegations that fiduciaries chose annuities that weren’t the safest available are sufficient for DB plan participants to have Article III standing. The defendants in the two cases where the judges ruled the plaintiffs had standing have already filed appeals, so the issue is far from resolved. Even if courts find that plaintiffs have standing, whether they will ultimately prevail on their fiduciary breach allegations remains to be seen. No court has yet opined on the validity of the plaintiffs’ claims or whether the plan fiduciaries in these cases in fact violated their ERISA duties. Plan sponsors hoping for clarity on the likely outcomes of these lawsuits will have to wait a little longer.

• Thole v. US Bank NA, 590 US 538 (2020)

• DOL leaves pension risk transfer guidance unchanged ... for now (July 9, 2024)
• High court nixes ERISA fiduciary case over DB plan investments (June 4, 2020)