WASHINGTON-The Pension Benefit Guaranty Corporation today announced it will assume responsibility for the pension plans of 70,000 workers and retirees of Delphi Corp., the nation's largest producer of automotive parts. The PBGC will initiate action to become trustee of the plans, a process that could last up to several months.
The PBGC is stepping in to protect the Delphi pensions because the restructuring Delphi cannot afford to maintain its pension plans and General Motors has stated it will not assume them. Delphi was spun off from GM in 1999.
Since Delphi entered bankruptcy protection in 2005, the PBGC has worked intensively with Delphi, GM and other stakeholders to keep the pension plans ongoing. In September 2008 GM took on approximately $2.5 billion in liabilities of the Delphi Hourly Plan, and until its recent restructuring in bankruptcy, GM had been expected to assume the entire obligation for the hourly plan.
Delphi sponsors six defined benefit plans for its workers. The Delphi Hourly Pension Plan covers 47,000 participants and has about $3.7 billion in assets and more than $8 billion in liabilities, according to PBGC estimates. The PBGC expects to be responsible for about $4 billion of the plan's shortfall of nearly $4.4 billion.
The Delphi Salaried Pension Plan covers about 20,000 workers and retirees, and has $2.4 billion in assets and liabilities of $5 billion, according to PBGC estimates. The PBGC expects to be responsible for about $2.2 billion of its estimated $2.6 billion in underfunding.
In addition, the agency will be responsible for $50 million in underfunding of four smaller Delphi plans with 2,000 participants. These plans are the ASEC Manufacturing Retirement Program; Delphi Mechatronic Systems Retirement Program; Packard-Hughes Interconnect Bargaining Retirement Plan; and Packard-Hughes Interconnect Non-Bargaining Retirement Plan.
The PBGC will pay pension benefits up to the limits set by law. In 2009, the maximum benefit for a 65-year-old is $54,000 per year. The maximum is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and supplements are generally not insured, and benefit increases made within the past five years may not be fully guaranteed.
The PBGC insures defined-benefit pension plans, and pays benefits earned in those plans up to legal limits. The PBGC does not insure pension benefits above the legal limits, health benefits or other types of employee benefits. Workers and retirees with questions about non-insured benefits offered by Delphi or guaranteed by General Motors should contact those companies.
Answers to frequently asked questions from Delphi workers and retirees, as well as general PBGC information and an introductory video may be found on the Auto Sector Information page on the PBGC Web site, www.pbgc.gov. Delphi workers with questions may also call toll-free at 1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask for 800-400-7242.
Until the PBGC becomes trustee, the pension plans will remain ongoing under company sponsorship. The agency will send notification letters to all plan participants when it becomes trustee. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire.
Delphi retirees who draw a benefit from the PBGC may be eligible for the federal Health Coverage Tax Credit. Further information may be found on the PBGC Web site at http://www.pbgc.gov/wr/benefits.html.
Assumption of the plans' unfunded liabilities will increase the PBGC's claims by approximately $3.5 billion, as the claim was previously included at a lower estimated amount in the agency's fiscal year 2008 financial statements, in accordance with generally accepted accounting principles.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 29,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.