A federal judge has dismissed another pension-risk-transfer lawsuit because Athene has not yet missed a pension check. https://www.asppa-net.org/news/2026/9/lack-of-standing-stymies-prt-suit/
That is not financial analysis.
That is waiting for the fire before admitting someone replaced the sprinkler system with a garden hose.
In Dow v. Lumen Technologies, Lumen transferred approximately $1.4 billion of pension obligations covering 22,600 retirees to Athene. Before the transaction, the retirees had a diversified pension portfolio, Lumen’s continuing contribution obligation, ERISA protections, and the federal Pension Benefit Guaranty Corporation.
Afterward, they depended primarily on one private-equity-controlled insurer—Athene—and the flimsy, post-failure state guaranty-association system.
U.S. District Judge Lewis Babcock nevertheless ruled that the retirees had not plausibly alleged an injury because Athene has made its payments since 2021.
By that logic, a fiduciary can exchange a federally protected pension for a materially riskier single-company promise and nobody is injured until the company actually defaults.
That is wrong.
Risk has value.
Federal protection has value.
Diversification has value.
A downgrade escape provision has value.
Losing those protections is an injury today.
Lumen Kept the Savings. Retirees Got Athene.
Lumen calls this a “pension risk transfer.”
For once, Wall Street chose an honest name.
The risk did not disappear. Lumen transferred it from itself to retirees.
Before the transaction, Lumen had to support its pension plan. If investments underperformed, Lumen generally had to contribute more. If the plan and sponsor failed, the PBGC provided a federal backstop.
After the transaction, Lumen escaped those obligations. It also stopped paying PBGC premiums for the transferred retirees.
The retirees received an Athene annuity.
Lumen allegedly saved money by choosing Athene instead of safer traditional insurers. It kept those savings while retirees absorbed the additional credit, liquidity, regulatory, affiliate, offshore-reinsurance, and recovery risks.
Lumen got cash savings.
Athene got $1.4 billion in pension obligations.
Retirees got the risk.
How is that not an injury?
This Was Not Just Any Insurance Company
The court discussed Athene as though it were simply another highly rated insurer that happened to submit a competitive bid.
That ignores the extraordinary scrutiny surrounding Athene and Apollo.
Athene is Apollo’s giant insurance balance sheet—the place where Apollo-originated private credit, mortgages, structured assets, affiliated investments, and other difficult-to-value obligations can be held against long-term annuity promises.
As I wrote in “Apollo’s Garbage Dump—Athene Loading Up on Risk Endangers Retirees,” Athene has been increasing its exposure to private credit and commercial real estate while relying heavily on Federal Home Loan Bank funding and complex affiliate structures.
Apollo originates assets.
Athene buys many of them.
Apollo earns fees and spreads.
Retirees provide the long-term money.
If the assets are overstated, illiquid, affiliated, or deteriorating, Athene’s annuity holders ultimately bear the risk.
Athene also has a concrete PRT regulatory history. In 2020, the New York Department of Financial Services imposed a $45 million penalty after finding that Athene had conducted 14 large pension-risk-transfer transactions involving thousands of New York policyholders through an unlicensed subsidiary.
That alone should have prevented the court from treating the complaint’s concerns as invented speculation.
Then Athene Appeared in the Epstein Files
The Athene story has now become even more troubling.
The released Epstein files include an April 2015 email in which Jeffrey Epstein claimed involvement in discussions concerning Athene, insurance regulation, capital, foreign structures, tax basis, discount rates, and what he described as a complex transaction involving approximately $2 billion in taxes.
The email referred to a “Rowan request re Athene,” an apparent reference to Apollo co-founder and current CEO Marc Rowan. Other disclosed material shows Rowan met Epstein at Epstein’s New York residence in January 2016. An SEC complaint submitted by the American Federation of Teachers and the American Association of University Professors has called for investigation of Apollo’s disclosures and specifically cited the Athene-related material.
Epstein’s claims are not independent proof that he created Athene’s tax structure or that any crime occurred. Apollo and the individuals involved should have the opportunity to respond fully.
But the documents are unquestionably relevant to transparency, governance, conflicts, and the history of Athene’s structure.
Epstein claimed that he had discussed Athene-related tax and regulatory matters involving the firm’s founders and senior leadership. Leon Black later paid Epstein approximately $158 million for tax and estate-planning services after Epstein’s 2008 conviction. Black has denied wrongdoing and has said the relationship concerned legitimate financial advice.
These are not internet rumors. They are subjects of congressional, regulatory, union, media, and investor scrutiny.
Yet retirees challenging the transfer of their federally protected pensions to Athene are being denied discovery because a judge has decided they suffered no injury.
That is backwards.
The extraordinary Athene-related disclosures are precisely why discovery is necessary.
The Credit Market Is Already Pricing Athene Risk
The judge focused on Athene’s insurance-company rating.
He apparently ignored the market.
Credit-default-swap prices measure what sophisticated investors charge to insure against a company’s default. Athene’s CDS protection has been extraordinarily expensive compared with several large traditional insurers.
CDS prices are not predictions that Athene will fail tomorrow. But they are observable market prices for credit risk.
When the market charges substantially more to protect Athene debt than Prudential, MetLife, or other traditional insurers, a court cannot honestly call the difference in risk purely hypothetical.
The market is saying that the obligations are not interchangeable.
This matters because PRT fiduciaries are supposed to choose the safest available annuity—not merely an insurer capable of obtaining an investment-grade rating.
The ratings agencies may assign a letter.
The CDS market attaches a price.
The price says Athene risk is real.
As I recently wrote, independent academic research has also found an “Apollo premium”. Apollo-controlled portfolio companies reportedly pay approximately 100 basis points more to borrow than otherwise comparable private-equity-controlled companies.
The researchers concluded that lenders appear to demand additional compensation because of Apollo’s reputation for aggressive treatment of creditors.
If sophisticated lenders price Apollo-related conduct risk, why should a federal judge pretend that retirees suffer no injury when their lifetime pensions are transferred to Apollo’s insurer?
The Judge Completely Ignored Downgrade Protection
The decision also exposes the courts’ continuing ignorance of downgrade provisions.
A meaningful downgrade clause could protect retirees before insolvency. It could require collateral, additional security, transfer to a stronger insurer, or another corrective action when the insurer falls below an agreed credit standard.
That is when protection is needed.
Not after the insurer has failed.
Not after rehabilitation begins.
Not after assets are frozen.
Not after policyholders hire lawyers.
Not after state guaranty limits become relevant.
I have repeatedly argued that a general-account annuity containing a strong downgrade provision can be safer than a supposedly protected separate-account annuity without one.
But most PRT annuities appear to give retirees no meaningful right to escape when the insurer deteriorates.
The Lumen retirees did not choose Athene.
They cannot sell their annuity.
They cannot diversify away from Athene.
They cannot move back into the pension plan.
They cannot demand that Lumen resume its guarantee.
They cannot purchase CDS protection on their individual benefits.
And apparently they cannot even obtain discovery unless they wait for Athene to miss a payment.
That is not protection.
That is captivity.
The State Guaranty Association Is Not a Cure
Judge Babcock reasoned that an Athene failure might not cause losses because state guaranty associations could provide protection.
That may be the worst part of the decision.
State guaranty associations are not the PBGC.
They are not the FDIC.
They are not meaningfully prefunded national insurance.
As I explained in “State Guaranty Associations Behind Annuities Are Still a Joke,” they are primarily post-insolvency assessment mechanisms.
When an insurer fails, the surviving insurers are assessed. Those assessments are subject to annual limits. Coverage varies by state and is capped at the policyholder level.
NOLHGA reported only about $7.53 billion of nationwide annual assessment capacity for allocated annuities in 2023 and a shockingly small $73 million for unallocated annuities.
That is not cash sitting in a national rescue fund. It is principally the statutory capacity to assess surviving companies after failures occur.
Meanwhile, U.S. life-insurer general accounts hold trillions of dollars in assets.
The Chicago Federal Reserve has acknowledged that it is unclear how the guaranty system would handle the failure of a relatively large U.S. insurer.
The system has never been tested against simultaneous distress among today’s giant private-credit-heavy, offshore-reinsured insurance complexes.
Yet the judge used that untested system to conclude that the retirees’ risk was too speculative to enter a courtroom.
State Guaranty Associations Arrive After the Damage
A state guaranty association does not prevent a downgrade.
It does not restore ERISA protection.
It does not restore Lumen’s contribution obligation.
It does not restore PBGC coverage.
It does not give retirees diversification.
It does not prevent rehabilitation, payment restrictions, litigation, restructuring, delays, or losses above state limits.
The sequence is more like this:
First comes deteriorating credit.
Then a downgrade.
Then liquidity pressure.
Then rehabilitation.
Then payment and transaction restrictions.
Then litigation and valuation disputes.
Then possibly liquidation.
Only then does the guaranty association fully enter the picture.
Anything above the state limit may become a creditor claim against an insolvent estate.
That is not equivalent to keeping the pension inside ERISA.
Private Equity Has Made the Guaranty System More Dangerous
The state system was built for isolated insurer failures.
It was not designed for insurers that hold similar portfolios of private credit, CLOs, real estate loans, structured securities, affiliated assets, and offshore-reinsurance recoverables.
If one insurer fails, the surviving insurers must help fund the guaranty response.
But those surviving insurers may own the same types of assets and be suffering the same market losses.
The system then demands more cash from insurers precisely when industry liquidity and capital are already under pressure.
One insurer fails.
Other insurers are assessed.
Those insurers are already exposed to the same private-credit downturn.
Their liquidity weakens.
The guaranty system becomes another source of financial stress.
That is a procyclical rescue mechanism—not a federal guarantee.
No Missed Check Does Not Mean No Injury
Suppose a fiduciary replaces a diversified AA bond portfolio with one BBB obligation paying the same coupon.
Has the investor suffered no injury until the BBB issuer defaults?
Of course not.
The new obligation is worth less because it contains more risk.
The same principle applies here.
Before Lumen’s PRT, retirees had:
- Diversified pension assets;
- Lumen’s contribution obligation;
- ERISA funding requirements;
- Federal fiduciary protections; and
- PBGC insurance.
Afterward, they had one Athene annuity, limited state guaranty protection, no apparent downgrade exit, and no ability to diversify.
That is a reduction in economic value even if this month’s payment arrived on time.
The court confused the ultimate loss with the present injury.
Thole Is Not a PRT Case
The Supreme Court’s Thole v. U.S. Bank decision involved retirees who remained in the same defined-benefit plan. Their sponsor, plan structure, ERISA protection, and PBGC backstop remained intact.
Lumen’s retirees were removed from that entire system.
Lumen changed:
- The entity responsible for payment;
- The assets supporting the obligation;
- The applicable regulatory system;
- The federal protections;
- The insolvency process;
- The retirees’ recovery rights; and
- The party bearing the residual risk.
That is not merely investment mismanagement inside a continuing pension plan.
It is a permanent substitution of obligors and protections.
Even Thole recognized that a substantially increased risk of pension failure could support standing. The Lumen retirees specifically alleged increased risk and a present reduction in the value of their pension promises.
The judge acknowledged that Thole did not involve a PRT—and then essentially treated it as though it did.
Appeal This Decision
The Tenth Circuit should reverse and allow discovery.
The retirees should be permitted to learn:
- Which insurers bid;
- How much cheaper Athene was;
- Whether safer insurers were available;
- Whether the market price reflected Athene’s greater credit risk;
- What Athene CDS spreads showed at the time;
- Whether State Street examined Athene’s affiliates, private credit, offshore reinsurance, liquidity, and regulatory history;
- Whether the fiduciaries investigated the Athene references in the Epstein material;
- Whether the annuity contains any meaningful downgrade provision;
- What happens if Athene is downgraded;
- How many retirees have benefits exceeding state guaranty limits;
- What Lumen saved in purchase price and PBGC premiums; and
- Whether those savings represented risk transferred to retirees without compensation.
Lumen removed retirees from ERISA, eliminated PBGC protection, ended its own pension obligation, selected an insurer under extraordinary regulatory, credit-market, governance, and Epstein-related scrutiny, and apparently provided no meaningful downgrade escape.
The judge says there is no injury because Athene has not failed yet.
The law should not require retirees to wait for the time bomb to explode before they are allowed to examine who built it, who profited from it, and why their fiduciaries put it under their retirement.
The CommonSense 401k Project 