U.S. Government Wrongfully Terminated Delphi Salaried Retirement Plan in 2009
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- Last Updated: Sunday, 22 September 2024 14:27
Please join the bipartisan support for the non-partisan Susan Muffley Act to restore the unfairly terminated pension plan for salaried workers from Delphi Corporation.
Susan Muffley Act – S.2277 / H.R.735
BACKGROUND: Delphi Corporation was the largest parts supplier to General Motors (GM) in 2009 when the Obama Administration created an Auto Team to save the U.S. auto industry during the Great Recession. Leading GM through an unprecedented 40-day bankruptcy, the Auto Team decided that Delphi’s traditionally well-funded salaried pension plan should be terminated while hourly pension plans should be saved. But the Auto Team’s mission clashed with the mission that Congress gave to the PBGC.
THE AUTO TEAM MISSION: The Administration and the U.S. Treasury instructed a handful of temporary U.S. Government appointees to act in a “commercially reasonable” manner to save the U.S. auto industry. The Special Inspector General for the TARP Program (SIGTARP) noted that no policies or procedures defined that term – “Without policies or procedures to define commercial reasonableness, Treasury used commercial reasonableness as a justification for all of its actions, even when those actions were based on other concerns.” See [SIGTARP 13-003 “Lessons Learned”]
This put the Auto Team’s mission at odds with Congress’ mission to the PBGC
The PBGC’s MISSION: In 1974, Congress defined the purpose of the PBGC under 29USC§1302(a)(1) to “encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants” But the PBGC abandoned this role. [see appendix]
In 2009, to speed GM through bankruptcy, Government directed the PBGC to terminate the Delphi Salaried Retirement Plan.
Congressional intent for the PBGC to protect retirees was abandoned.
APPENDIX
THE PBGC SOUGHT TO CONTINUE THE DELPHI SALARIED RETIREMENT PLAN (“DSRP”) – In a May 29, 2013, court deposition (House), Joseph House – who said he led the PBGC’s “coordination” or “collaboration” with the Auto Team (his words) – stated that the PBGC was still advocating to save Delphi’s pension plans in August 2008 and January 2009: “It’s consistent with the agency’s mission,” he said (pp 15-16).
- When asked whether he or the PBGC did anything to persuade The Auto Team at Treasury to work towards preserving Delphi pension plans, Mr. House said “I don’t have any recollection of trying to persuade Treasury of anything.” (pp 44-45)
BUT THE AUTO TEAM WANTED DELPHI’S SALARIED PLAN TERMINATED – In a July 2009 court deposition (Feldman), Auto Team member Mathew Feldman said “In my initial discussions with the PBGC ...we were trying to facilitate an agreement where the salaried plan would be ... taken over by the PBGC ...” (pp 158-59)
- So did General Motors! SIGTARP wrote: According to one GM official interviewed by SIGTARP, ‘Ultimately… we needed the [Delphi pension] plans to be terminated.’” (pages 13-14) NOTE: It is unprecedented for the officers of GM to cause the pension plans at a wholly separate company to be terminated for GM’s benefit, but the Auto Team wanted to make that happen, and the PBGC chose to cooperate.
PBGC DIDN’T EVEN TRY TO TALK TO OTHERS INTERESTED IN PURCHASING DELPHI, a standard PBGC practice in such situations. There were several potential acquirers of Delphi in April and May 2009. Mr. House said on Page 38 of the deposition: “I’m familiar with entities with an interest in acquiring Delphi,” including Delphi’s foreign assets.
- But in later questioning, when asked if he was aware of any parties that had expressed interest in acquiring Delphi’s assets, Mr. House contradicted his previous answer and simply replied “No.” (pg 131)
- When asked whether he or PBGC did anything to persuade Delphi’s bankruptcy lenders to preserve its pension plans, Mr. House answered: ”I don’t recall anything like that.” (pp 45-46)
- When asked, “In other transactions that you’ve been involved with, where a pension plan is in trouble and there is a potential acquirer, does PBGC have communications with a potential acquirer …? House answered, “I think the answer is yes.” (Page 133)
- But when asked, "To your knowledge, no one from PBGC talked to any of these potential buyers," Mr. House replied, "Not that I'm aware of." (pages 133-134).
The Auto Team made a deal with the PBGC to release the liens protecting the value of the salaried pension plan which ultimately led to a profit of more than $500 million for the PBGC, but only the original face value of the liens was used to support the salaried plan. (GAO 12-168 pgs 22/23)
The Delphi Salaried Plan was always well managed by GMIMCo and administered by Fidelity. The conditions that led to the termination were unprecedented and unique.
The Delphi Salaried Plan was funded at a level in the top half of the100 largest pension plans in America during the recession, roughly equivalent to the PBGC’s own funding at the time.
The assets held by the PBGC have grown to be far more than enough to pay the full pensions, any funding from Treasury to PBGC would simply replenish the PBGC’s $50 billion+ surplus.