The Congressional Research Service (CRS) released a report on a plan with billions in liabilities that the Pension Benefit Guaranty Corporation (PBGC) took over and then paid out less benefits than it otherwise would have. It also describes efforts to remedy this consequence.
The plan was that of Delphi Technologies, a parts and components supplier to automakers that spun off from General Motors (GM) in 1999. Delphi sponsored six single-employer pension plans.
Delphi filed for bankruptcy in October 2005. As part of the bankruptcy reorganization plan, GM agreed to the transfer of up to $3.4 billion in Delphi’s hourly plan liabilities to the rate-paying employee pension plan. GM schedule. GM initially transferred approximately $2.6 billion of liability from the Delphi hourly plan to the GM plan. On June 1, 2009, GM filed for bankruptcy and later received financial assistance from the US government to help with its reorganization. In July 2009, GM informed Delphi that it would not assume the hourly plan and would not transfer additional liabilities from Delphi to GM’s pension plan. Because GM refused to assume the additional obligations of Delphi’s pension plans, the PBGC terminated Delphi’s DB plans, effective July 31, 2009.
Most workers in pension plans that are taken over by the PBGC receive all of the promised benefits, but some workers may receive less than that because the PBGC cannot pay an individual more than a maximum benefit set by law. Benefits have been reduced for some Delphi plan participants.
A memorandum from President Trump issued on October 22, 2020 expressed concern over these developments. According to the memo, “For years, Delphi Corporation was a staple of the automotive manufacturing industry in the United States. Tens of thousands of Americans have made careers at Delphi and, through their work, have helped make America the world’s leading producer of automobiles. After the Delphi bankruptcy, thousands of salaried and non-union Delphi workers, through no fault of their own, had their pension plans terminated, after which trusteeship was transferred to the Pension Benefit Guaranty Corporation (PBGC) for administration, within legal limits. ”
In 2009, the Delphi Salaried Retiree Association (DSRA) and others sued; the PBGC, the US Treasury Department and the Presidential Auto Industry Task Force were among the defendants.
The DSRA asserted that the termination of the Delphi Retirement Program for salaried employees violated ERISA and the Due Process Clause of the Fifth Amendment to the US Constitution. They also claimed that the agreement between GM and unions representing hourly employees to supplement hourly employee pensions violated the Equal Protection Clause of the Fifth Amendment.
DSRA said GM unfairly discriminated against employees, GM’s bankruptcy in June 2009 nullified 1999 top-up agreements, and GM renegotiated and topped up union pension plans for political reasons .
The federal district and appellate courts denied the plaintiffs’ claims. In January 2022, the Supreme Court declined to hear the case.
Executive branch activity in response to factors and actions affecting Delphi DB plans and their participants did not change the situation.
“The fate of Delphi’s salaried and nonunion workforce is of great concern to my Administration, which is committed to protecting all American workers,” President Trump wrote in his October 2020 memo, which ordered the heads of three departments to review the pension plans the PBGC held under guardianship, including Dephi.
In response to congressional inquiries, in August 2021, the Deputy Assistant Secretary for Banking and Financial Affairs of the Office of Legislative Affairs of the U.S. Treasury reported that “the Departments of Treasury, Labor, and Commerce have concluded that action by the Congress would be required to restore these lost retirement benefits. .”
On the hill
The report notes that there is pending legislation that would remedy the situation.
For example, Rep. Daniel Kildee (D-MI) introduced the Susan Muffley Act of 2022 (HR 6929) to the House on March 3, 2022; four days later. Sen. Sherrod Brown (D-OH) introduced a nearly identical bill, S. 3766, in the Senate. Both bills would require the PBGC to recalculate and reinstate the monthly benefits of plan participants who are not covered by the supplemental agreements of the six Delphi plans terminated by the PBGC. They also provide that plan members not covered by the supplemental agreements would receive lump sum payments with interest for reduced benefits due to the maximum PBGC guarantee.