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Delphi Hourly Pension Plan: PBGC Over- and Underpayments and GM’s Top-Up

Last Updated: December 9, 2016

 

Frequently Asked Questions:

Has PBGC been working with GM to provide them the information they need regarding my PBGC benefit so that GM can then calculate my top-up benefit?

Yes. PBGC and GM have been working since the plan was trusteed to ensure that each party has the information they need to determine benefits accurately and timely.

From the time the plan was trusteed, PBGC has been providing estimated benefit amounts for new retirees and beneficiaries to GM on a monthly basis. GM then uses those estimated benefit amounts to determine the tp-up benefits. In the summer of 2016, PBGC began issuing Benefit Determination Letters to let participants know the amount of their final benefit, which may be greater or lower than the estimated amount PBGC had paid in the past. Now that we have determined final benefits, we are sharing those benefit amounts with GM so that they can determine whether there are any adjustments needed to the top-up benefits they have been paying.

I received a Benefit Determination Letter letting me know that my PBGC final benefit is different than the estimated benefit I have been receiving. Will GM let me know of the corresponding change in the benefit paid by GM?

Yes. It is our understanding that GM will notify you of any changes to the monthly benefit you will receive from them as well as any under- or overpayments that may be due.

I received a Benefit Determination Letter letting me know that I was overpaid by PBGC. PBGC plans to recoup this overpayment from future benefits. However, due to the top-up benefits I received from GM, any overpayments made to me by PBGC resulted in an equal underpayment by GM. Why doesn’t PBGC collect the money directly from GM?

You are correct that for the majority of participants, most of the overpayment from PBGC resulted in GM paying less than it should have. However, PBGC cannot recover the overpayment from GM. PBGC’s payment of the Delphi plan benefit to a participant or beneficiary is separate from GM’s contractual obligation to pay a top-up benefit to that person. In other words, PBGC’s benefit-payment relationship is with the participant, not GM. By law, PBGC cannot recoup overpayments from someone other than the participant.

Note: Any plan benefits paid after July 31, 2009, the date the plan terminated – whether the payment came from Fidelity or directly from PBGC – are considered when determining any overpayment or underpayment amount.

OK - I understand that PBGC can’t work directly with GM to collect the overpayment. However, if my overpayment is owed by GM, will GM make up the amount of my benefit that is being reduced by recoupment?

Yes. In the majority of instances, the recoupment is attributable to amounts that PBGC was paying above what we are legally able to pay. Where GM determines that these amounts should have been paid by them, as part of the top-up benefit, they will “make-up” the amount of your benefit that is reduced by the recoupment.

GM will contact you directly with more information on this arrangement.

I received a Benefit Determination Letter letting me know that I was underpaid by PBGC. I received a lump sum equal to the amount of the underpayments plus interest. However, I also received a letter from GM letting me know that there is a corresponding overpayment that must be repaid to GM. How does this happen?

It is easiest to explain this one with an example. Say that your Delphi plan benefit was $1500 per month. PBGC estimated that you were due $1000 of that from us. So PBGC has been paying you $1,000 and GM has been paying $500. In calculating your final benefit we determine that you are actually due $1,250 from PBGC. PBGC has therefore underpaid you $250 per month – we total up those underpayments and add interest. We then pay you that amount in a lump sum. However, since GM has been overpaying you that $250 as part of their monthly benefit, you will owe that totaled-up amount to GM.

Will GM let me know if I owe a repayment to them as a result of the underpayment and if so, how much and how to repay them?

Yes.

If I receive a lump sum payment from PBGC to correct for an underpayment, but I owe all, or part of that amount, to GM, is the amount of the lump sum taxable?

The lump sum that you receive from PBGC is counted as income and therefore, taxable

If the lump sum payment is taxable, but I must repay all or part of the payment to GM, how do I avoid double taxation on the lump sum that PBGC pays to me?


There may be relief under the tax code that you can use. For example, if the amount you owe to GM is more than $3,000, the “Claim of Right” provision under section 1341 of the U.S. tax code may be applicable in the year you make the repayment. This “Claim of Right” provision allows the taxpayer to deduct certain payments from income where those payments are owed to another party. This may help offset the taxability of the lump sum PBGC pays you.

If the amount you owe to GM is $3,000 or less, you may be eligible to claim certain itemized business deductions. The availability of the relief, however, depends on your adjusted gross income for the year.

You can learn more about the rules for claiming these deductions by following this link (see page 92 of the IRS publication):  https://www.irs.gov/uac/about-publication-17.

PBGC is unable to provide tax advice based on your specific circumstances. Accordingly, you should consider consulting a tax advisor to find out how this tax relief may apply to you.