We stated earlier that we compare your PBGC Guaranteed Benefit to your "funded benefit." Let's explain what that means. If your plan was fully funded, that is, if it had enough assets to pay all benefits, you would receive the full pension Delphi would have provided. The assets are those in the plan as of the date of plan termination.
It's important to note that the Delphi Salaried Plan was not fully funded. Keep in mind that our calculations are at the preliminary (or estimated) stage for your plan's funding levels.
To allocate assets, PBGC is required by federal law to divide benefits into six funding categories called "Priority Categories," or "PCs." Assets are first used for benefits in PC1, then PC2, then PC3, and so forth.
PC1 consists of voluntary employee contributions, and PC2 of mandatory employee contributions to the plan. Federal law defines voluntary and mandatory contributions. Under this law, employee contributions in the Delphi plan are considered mandatory.
In the Delphi Salaried plan, PC2 benefits are fully funded by the plan’s assets. You will always receive a benefit worth at least as much as the contributions you made.
Next, assets are allocated to PC3 benefits. These are plan benefits that were in pay status, or could have been, three years before the plan ended, which is July 31, 2006. These benefits are generally determined under the plan provisions in effect five years before the plan ended.
Assets are next allocated to pay for benefits in PC4. PC4 consists mainly of your Guaranteed Benefits.
Any remaining assets are allocated to PC5 or PC6. PC5 and PC6 are non-guaranteed benefits that are not in higher priority categories. Benefits are in PC5 if they are non-forfeitable, what we call vested, as of the plan's termination date. Otherwise, they are in PC6.
Now we'll discuss our current estimates of how well funded your plan is.
Plan assets in the Delphi Salaried plan cover 100% of PC2. Assets will cover some, but not all, of the benefits in PC3. At this time, PBGC estimates that assets will cover roughly 70% of PC3 benefits.
If both your Guaranteed Benefit and benefit from plan assets are less than the plan benefit, you may be entitled to an additional amount called the "4022(c)" benefit, based on the money PBGC recovers from the plan sponsor.
Where the plan sponsor is in bankruptcy, the money is recovered through PBGC's bankruptcy claims and is in addition to plan assets. This money is allocated in the same Priority Category order as plan assets.
At the time of this video, PBGC's recovery in bankruptcy, and so 4022(c) benefits have yet to be determined.