Despite All Efforts, Delphi Plans Go to PBGC

July 22, 2009 ( - The Pension Benefit Guaranty Corporation (PBGC) 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.

A news release said the agency 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.

Just last week, a group of Delphi retirees filed suit in federal court to block such a move (see Delphi Retirees Try to Block PBGC Takeover ).

The agency pointed out in its announcement that 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 (see GM Steps in on Delphi Plan ), and until its recent restructuring in bankruptcy, GM had been expected to assume the entire obligation for the hourly plan (see One Delphi Plan Goes to GM, One to PBGC ).

Also, last September, a bankruptcy court judge allowed Delpi to freeze its pension plans, which the PBGC said would ensure pensions were paid (see Delphi Gets Court OK for Pension Freeze ).

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 agency said assumption of the plans’ unfunded liabilities will increase its claims by approximately $3.5 billion, as the Delphi 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 (see PBGC Funding Gap Ballooning as Plan Terminations Increase ).