Key Events Leading to the Termination of the Delphi Defined Benefit
Plans
GAO-11-373R March 30, 2011
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Summary
The Delphi Corporation was a global supplier of mobile electronics and
transportation systems that began as part of the General Motors
Corporation (GM) and was spun off as an independent company in 1999.
Following bankruptcy in 2005, Delphi's six qualified defined benefit (DB)
plans were terminated and trusteed by the Pension Benefit Guaranty
Corporation (PBGC) in July 2009. These terminations culminated from a
complex series of events involving Delphi, GM, various unions, the U.S.
Department of the Treasury (Treasury), as well as PBGC. Congress asked us
to examine a range of issues related to PBGC's termination of Delphi's DB
plans, such as the decision to terminate, the efforts to secure plan
assets, the treatment of collective bargaining agreements, and Treasury's
role throughout the process. As discussed with Congressional staff members
in December 2010, this report includes a timeline of key events leading to
the termination of Delphi's plans. The timeline focuses, in particular, on
events related to the reasons for GM providing retirement benefit
supplements to certain Delphi employees, but not to others, and Treasury's
role in those events. We will compare PBGC's process for terminating
Delphi's pension plans with its process for terminating other large,
complex plans in a future report.
During the 1999 spin-off negotiations between GM and Delphi, three
unions secured benefit guarantees for their members: International Union,
United Automobile, Aerospace, and Agricultural Implement Workers of
America (UAW); the International Union of Electronic, Electrical,
Salaried, Machine and Furniture Workers, AFL-CIO (IUE); and the United
Steelworkers of America (USWA). The benefit guarantees included an
agreement that GM would provide a retirement benefit supplement (referred
to as "top-ups") to certain Delphi employees who were members of these
unions should their pension plans be frozen or terminated and they were to
suffer a resulting loss in pension benefits. No other Delphi employees had
a similar agreement to receive a top-up, including salaried workers and
hourly workers belonging to other unions. Over the course of events that
followed, the agreements with these three unions were ultimately preserved
through the resolution of the bankruptcies of both GM and Delphi. Because
Delphi's pension plans were terminated with insufficient assets to pay all
accrued benefits, and because PBGC must adhere to statutory limits on the
benefits it guarantees, many Delphi employees will receive a reduced
pension benefit from PBGC compared with the benefits promised by their DB
plans. Those Delphi employees receiving the top-ups will have their
reduced PBGC benefit supplemented by GM while others will
not.