The Congressional Research Service (CRS) has issued a report on a plan with billions in liabilities that the Pension Benefit Guaranty Corporation (PBGC) took over and that then paid less in benefits than it otherwise would have. It also outlines efforts to address that consequence.
The plan was that of Delphi Technologies, a parts and components supplier to auto makers that was 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 of liabilities from the Delphi Hourly Plan to the GM Hourly-Rate Employees Pension Plan. 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 subsequently received U.S. government financial assistance to assist with its reorganization. In July 2009, GM advised Delphi that it would not assume the hourly plan and would not transfer additional liabilities from Delphi to the GM pension plan. Because GM declined to assume the additional liabilities from the Delphi pension plans, the PBGC terminated the Delphi DB plans, effective July 31, 2009.
Most workers in pension plans that are taken over by the PBGC receive all of their 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 were reduced for some participants in Delphi plans.
A memorandum President Trump issued on Oct. 22, 2020 expressed concern over the developments. Said the memo, “For years, Delphi Corporation was a fixture in the United States automobile manufacturing industry. Tens of thousands of Americans made their careers at Delphi, and, through their work, helped to establish America as the world’s preeminent producer of automobiles. After Delphi went bankrupt, thousands of salaried and non-unionized Delphi workers, through no fault of their own, had their pension plan terminated, upon which trusteeship was transferred to the Pension Benefit Guaranty Corporation (PBGC) for administration, consistent with statutory limits.”
In 2009, the Delphi Salaried Retiree Association (DSRA) and others filed a lawsuit; the PBGC, the U.S. Treasury Department, and the Presidential Task Force on the Auto Industry were among the defendants.
The DSRA claimed that the termination of the Delphi Retirement Program for Salaried Employees violated ERISA and the Due Process Clause of the Fifth Amendment to the U.S. Constitution. They also claimed that the agreement between GM and the unions representing hourly employees to top-up the hourly employees’ pensions violated the Equal Protection Clause of the Fifth Amendment.
The DSRA said that GM unfairly discriminated against the salaried employees, that GM’s bankruptcy in June 2009 voided the 1999 top-up agreements and that GM renegotiated and provided the top-up to the unions’ pension plans for political motivations.
Federal district and appellate courts rejected the plaintiffs’ claims. In January 2022 the Supreme Court declined to hear the case.
Activity in the Executive Branch in response to the factors and actions affecting the Delphi DB plans and their participants has not changed the situation.
“The plight of Delphi’s salaried and non-unionized 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 directed the heads of three departments to review pension plans the PBGC held in trusteeship, including Dephi.
In response to Congressional inquiries, in August 2021 the Deputy Assistant Secretary for Banking and Finance Office of Legislative Affairs in the U.S. Treasury indicated that “the Departments of Treasury, Labor, and Commerce concluded that Congressional action would be required to restore these lost pension benefits.”
On the Hill
The report notes that there is pending legislation that would address the situation.
For instance, Rep. Daniel Kildee (D-MI) introduced the Susan Muffley Act of 2022 (H.R. 6929) in 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 restore the monthly benefits of plan participants who are not covered by the top-up agreements in the six Delphi plans terminated by PBGC. They also provide that plan participants not covered by the top-up agreements would receive lump-sum payments with interest for the benefits that had been reduced due to the PBGC’s maximum guarantee.