US Department of Labor files amicus brief clarifying use of pension risk transfers to annuity providers
WASHINGTON – The U.S. Department of Labor today filed an amicus brief with the U.S. Court of Appeals for the Second Circuit, clarifying the business requirements for offloading defined benefit plan liabilities through pension risk transfers.In the brief, filed in Doherty v. Bristol-Myers Squibb, No. 26-1021, the department reiterates the appropriate standards for pension risk transfers, also known as “derisking.”
The U.S. Department of Labor has weighed in again on pension risk transfers, filing an amicus brief with the Second Circuit in Doherty v. Bristol-Myers Squibb. The case centers on whether an employer's selection of an annuity provider during a derisking transaction can itself be challenged as a breach of fiduciary duty under ERISA. The plaintiffs argue that Bristol-Myers Squibb did not pick the safest available insurer. The Department of Labor disagrees, and is using the brief to draw a clear line around who gets to make that call.
The mechanics here matter. Defined benefit plans accumulate long-tail liabilities that employers are eager to shed. The standard exit is a bulk annuity purchase, transferring the obligation to an insurer in exchange for a premium. The plaintiffs' theory, if it gained traction, would convert every annuity provider selection into a potential fiduciary lawsuit, effectively second-guessing the sponsor's business judgment. The Department of Labor is signaling that this is not how ERISA was designed to operate.
The brief makes two structural arguments. First, the plaintiffs lack standing because they have received all benefits owed and face no concrete risk of loss. Second, only the plan sponsor has authority to execute a derisking transaction, and the fiduciary process around it is governed by longstanding agency guidance, not by retrospective litigation over which insurer was "safest." The framing is deliberate: protect the sponsor's discretion, and protect the market for these transactions from disruption.
This is the second amicus filing on the topic this year, following the January brief in Konya v. Lockheed Martin. The pattern is consistent. The Department of Labor is building a record that pension risk transfers, when conducted under existing fiduciary standards, are a legitimate tool for managing obligations, and that aggressive litigation can deter employers from using them at all. The concern is not hypothetical. Annuity providers price risk, and a hostile litigation environment raises the cost of every transaction.
For the broader labor market, the implications are narrow but real. Derisking is how large employers wind down legacy pension commitments, often as a precursor to workforce restructuring, divestiture, or simply balance sheet cleanup. If the Second Circuit adopts the plaintiffs' standard, expect fewer of these transactions, longer-lived defined benefit obligations on corporate books, and more friction for employers trying to exit. The Department of Labor is making clear it prefers the opposite outcome: let sponsors manage the transition, and keep the courts out of the underwriting decision.