An Associated Press news report said its IRS agreement extends a June 15 deadline the company has to honor minimum funding requirements for it its pension plans, according to papers filed in the U.S. Bankruptcy Court in Manhattan.
Under the company’s so-called transformation plan, Delphi said it must lower its pension obligation to emerge from bankruptcy protection as a competitive entity (SeeDB Pension Freeze Part of Delphi Restructuring ). Plans are underway to shift some of the company’s pension liabilities into GM-sponsored plans, the AP said.
The waivers are connected to a pension plan for hourly workers and a separate plan for salaried employees. The waivers are important to Delphi because it allows the company to skip required payments to the plans that are due June 15 and moves the payment date to its emergence from bankruptcy protection, the news report said.
Delphi said that if the waivers aren’t in place the IRS will declare a $1.25 billion shortfall for the plans for the year ended September 30, 2006. That outcome would trigger an additional excise tax assessment of at least $125 million, the company said.
In exchange for the waivers, Delphi said it will make a $10 million “accelerated contribution” to its hourly plan following its emergence from Chapter 11.
Additionally, Delphi must give the Pension Benefit Guaranty Corp (PBGC). a $100 million letter of credit for its hourly plan and a $50 million letter for the salaried plan. The PBGC is a federal agency that insures pension plans sponsored by the private sector. Delphi said if the company failed to meet its obligations under the waivers, the PBGC would have the right to use the letters of credit to fund the company’s pension programs.
Delphi has been operating under Chapter 11 protection since October 2005.