This is the accessible text file for GAO report number GAO-12-168 
entitled 'Delphi Pension Plans: GM Agreements with Unions Give Rise to 
Unique Differences in Participant Benefits' which was released on 
December 15, 2011. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office:
GAO: 

Report to Congressional Requesters: 

December 2011: 

Delphi Pension Plans: 

GM Agreements with Unions Give Rise to Unique Differences in 
Participant Benefits: 

GAO-12-168: 

GAO Highlights: 

Highlights of GAO-12-168, a report to congressional requesters. 

Why GAO Did This Study: 

The Pension Benefit Guaranty Corporation (PBGC) terminated the 
underfunded six qualified defined benefit (DB) plans of the Delphi 
Corporation, a former subsidiary of General Motors (GM), in July 2009. 
Given questions about how PBGC came to terminate the plans, whether 
treatment for certain Delphi workers was preferential, and the role of 
the U.S. Department of the Treasury (Treasury) in these outcomes, GAO 
was asked to answer the following questions: 

(1) What precipitated PBGC’s decision to terminate Delphi’s plans and 
what was Treasury's role, if any? 

(2) What actions did PBGC take to secure Delphi domestic and foreign 
assets as part of its recovery process? 

(3) Why will certain Delphi employees receive reduced pension benefits 
and others will not? 

(4) What information was communicated to employees about the 
termination of their plans? 

GAO issued a timeline of key events leading to the plans’ termination 
in March 2011 (GAO-11-373R). To examine the issues more fully for this 
report, GAO analyzed additional information from PBGC, Treasury, GM, 
Delphi, and Delphi employee groups and unions, and interviewed 
representatives from those organizations. For comparison purposes, GAO 
also reviewed the termination and recovery processes for all ten firms 
with the largest termination claims from plans trusteed by PBGC.
Treasury’s comments generally agreed with GAO’s findings and 
conclusions. 

What GAO Found: 

As a result of the termination of Delphi’s pension plans in July 2009 
and statutory benefit limits, many Delphi retirees will receive less 
from PBGC than their full benefit promised by Delphi. However, some of 
those experiencing statutory reductions will still receive their full 
benefits because of union agreements with GM. With respect to PBGC's 
role in the process, the steps taken to terminate the plans and reduce 
some benefits according to statutory limits are consistent with PBGC’s 
usual actions when terminating large plans. 

* PBGC’s decision to terminate the plans was ultimately precipitated 
by the apparent lack of a viable sponsor, impending foreclosure on 
Delphi’s assets, and the prospect of increased losses for PBGC and the 
plans that would occur upon liquidation. Similar factors were often at 
play in PBGC’s decisions to terminate other large plans we reviewed. 

* PBGC used its authority under the law to file liens and negotiate 
recoveries of corporate assets on behalf of Delphi’s plans. Although 
PBGC ultimately recovered only about 6 percent of the total unfunded 
benefit liabilities in these plans, this ratio falls within the range 
of recovery ratios for other large terminated plans we reviewed. 

* Among the Delphi plan participants PBGC had reviewed as of June 
2011, just under half of both hourly and salaried plan participants 
received reductions in their promised benefits due to the application 
of statutory benefit limits. While initial estimates indicate a higher 
proportion of Delphi retirees have been subject to the guarantee 
limits compared with retirees of most other large terminated plans, 
PBGC expects Delphi’s higher proportion to decline once all benefit 
calculations are finalized. 

* Delphi sent required communications to employees concerning 
deteriorating plan funding, and PBGC sent communications concerning 
plan termination and its impact on participants’ benefits.
However, the role that GM played in the process was more unusual. Some 
Delphi hourly plan participants are protected from benefit losses 
caused by statutory limits because GM agreed to “top up” potential 
benefit losses for certain Delphi union employees. These agreements 
were renewed and upheld at numerous points in Delphi’s history, 
including by the “new GM” established in July 2009. Because of these 
agreements, about 60 percent of the participants in the hourly plan 
will have any statutory reductions in their benefits restored by GM. 
Other hourly employees, as well as all employees in Delphi’s salaried 
plan and the other smaller plans. were never covered by comparable top-
up agreements. 

Although acknowledging the significant role Treasury played in GM's 
restructuring, GM and Treasury officials stated that Treasury’s role 
was advisory concerning GM’s decisions not to take on additional 
Delphi pension liabilities but to honor the top-up agreements with 
some unions. Similarly, PBGC officials stated that PBGC independently 
made the decision to terminate the plans. Still, in response to a 
prior GAO recommendation, Treasury revised its reporting policy to 
increase transparency on its activities related to the auto industry. 
GAO believes that the most effective means of addressing concerns 
about Treasury’s multiple roles regarding pensions is also through 
such increased transparency. 

View [hyperlink, http://www.gao.gov/products/GAO-12-168]. For more 
information, contact Barbara Bovbjerg at 202-512-7215 or 
bovbjergb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Threat of Increased Losses Led PBGC to Terminate Delphi Pension Plans: 

PBGC Pursued Claims on Delphi's Assets, Resulting in between $600 
Million and $650 Million in Recoveries: 

Many Delphi Retirees Are Subject to Benefit Reductions and Only 
Certain Hourly Retirees Are Protected by Union Agreements with GM: 

Both Delphi and PBGC Provided Delphi Employees with Information: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Single-Employer Firms with the Largest PBGC Claims for 
Terminated Plans (1975 through 2011): 

Appendix II: Number and Percentage Delphi Retirees with Reductions in 
ERISA Benefits Due to Guaranteed Benefit Limits (as of June 1, 2011): 

Appendix III: Allocation of Plan Assets and Recoveries to Unfunded 
Nonguaranteed Benefits: 

Appendix IV: Comments from the Department of the Treasury: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Terminated Delphi Defined Benefit Plans, as of July 31, 2009: 

Table 2: Types of Guaranteed Benefit Limits under ERISA: 

Table 3: Number and Percentage of Delphi Retirees Subject to 
Reductions in Estimated Benefits Due to ERISA Limits (as of June 1, 
2011): 

Table 4: Allocation Priority Categories (PC): 

Table 5: Comparison of Allocation of Plan Assets and Recoveries among 
Plans of Firms with 10 Largest Claims: 

Figures: 

Figure 1: Who Is Bearing the Cost of Delphi Pension Plans' Unfunded 
Liabilities: 

Figure 2: PBGC Asset Recoveries in Delphi's Bankruptcy: 

Figure 3: Distribution of Asset Recoveries by PBGC in Delphi's 
Bankruptcy: 

Figure 4: Number of Delphi Employees Covered by GM Top-Ups, by Plan: 

Figure 5: Status of Benefits for Participants from Delphi's Hourly and 
Salaried Plans (as of June 2011): 

Abbreviations: 

AIFP: Automotive Industry Financing Program: 

DB: defined benefit plan: 

DIP: debtor-in-possession: 

DSRA: Delphi Salaried Retiree Association: 

ERISA: Employee Retirement Income Security Act of 1974: 

GM: General Motors: 

IUE: International Union of Electronic, Electrical, Salaried, Machine 
and Furniture Workers, AFL-CIO: 

MSR: mutually satisfactory retirement: 

PBGC: Pension Benefit Guaranty Corporation: 

UAW: International Union, United Automobile, Aerospace, and 
Agricultural Implement Workers of America: 

USWA: United Steelworkers of America: 

United States Government Accountability Office: 
Washington, DC 20548: 

December 15, 2011: 

Congressional Requesters: 

The Pension Benefit Guaranty Corporation (PBGC), the government 
corporation that insures private-sector defined benefit (DB) plans, 
terminated the six plans of Delphi Corporation (Delphi) in July 
2009.[Footnote 1] The plans were estimated to be underfunded by a 
combined $7.2 billion at termination, of which PBGC expects to cover 
about $6 billion. 

Since the termination, there has been controversy over different 
pension benefit outcomes for certain unionized and non-unionized 
Delphi retirees. Further, the involvement of the U.S. Department of 
the Treasury (Treasury) in the bankruptcy of General Motors (GM), 
Delphi's former parent company, raised questions for some regarding 
the role that Treasury played in PBGC's decision to terminate Delphi's 
pension plans and the resulting outcomes for Delphi plan participants. 
Given these concerns, you asked us to answer the following questions: 

1. What precipitated PBGC's decision to terminate the plans and what 
was Treasury's role, if any? 

2. What actions did PBGC take to secure Delphi domestic and foreign 
assets as part of its recovery process? 

3. Why will certain Delphi employees receive reduced pension benefits 
and others will not? 

4. What information was communicated to employees about the 
termination of their plans? 

In March 2011, we issued a report providing a timeline of key events 
related to the Delphi plan terminations in which we provided 
information about some of these issues.[Footnote 2] To address the 
issues more fully for this report, we conducted additional analysis of 
PBGC documents, such as benefit estimates, actuarial reports, internal 
documents on the termination decision and on asset recovery, and 
reports from PBGC's Office of Inspector General. We also conducted 
follow-up interviews with PBGC officials to clarify information from 
the documents. To explore further Treasury's role in the termination 
of Delphi's pension plans, we reviewed publicly available documents, 
such as Treasury officials' depositions and other legal documents, 
including those related to pending litigation,[Footnote 3] and 
conducted additional interviews of GM, Delphi, and the Delphi Salaried 
Retiree Association (DSRA). We reviewed relevant e-mails provided by 
PBGC and [Footnote 4]DSRA. We also interviewed union, GM, Delphi, and 
DSRA officials to obtain their perspectives on plan termination, asset 
recovery, benefit determination, and communications, as well as 
analyzed additional documents related to these issues from these 
groups, including data from GM about benefit guarantees they have paid 
or expect to pay to former Delphi employees. 

To provide benchmarks and comparative examples, we also gathered data 
about other terminated plans from PBGC's list of firms with the ten 
biggest termination claims in PBGC's history. (Delphi is number two on 
this list, behind United Airlines.)[Footnote 5] For example, to 
provide context for how PBGC pursued recoveries for Delphi, we 
reviewed the recovery process for all nine of the other firms on this 
list, and identified the allocation of recoveries across priority 
groups for all plans with more than 5,000 participants (18 of the 29 
plans these firms sponsored). We did not examine PBGC's actions to 
date to value Delphi's assets, as this effort is still ongoing. PBGC's 
Office of Inspector General has recently reported on deficiencies in 
PBGC's efforts to value assets for two other firms on the top-10 list: 
National Steel and United Airlines[Footnote 6]. According to the 
Inspector General's office, the contractor identified as having 
conducted the valuation of assets for both the National Steel and 
United Airlines terminations is not the contractor conducting the 
valuation of assets for Delphi. 

We conducted this work between April 2011 and December 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We found the 
data from PBGC and GM sufficiently reliable for the purpose of helping 
us answer our research questions, and we believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. 

Background: 

Delphi-GM History: 

Delphi was a global supplier of mobile electronics and transportation 
systems that began as part of GM and was spun off as an independent 
company in 1999[Footnote 7]. At that time, Delphi established two 
pension plans, with assets and liabilities transferred from their GM 
counterparts: the Delphi Hourly-Rate Employees Pension Plan (hourly 
plan) and the Delphi Retirement Program for Salaried Employees 
(salaried plan). When Delphi was spun off from GM in 1999, GM was 
required to collectively bargain with the affected unions--including 
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)[Footnote 8]; and the United Steelworkers of America (USWA); 
as well as other "splinter" unions.[Footnote 9] As a result of these 
negotiations, GM agreed to provide a retirement benefit supplement 
(referred to as "top-ups") to "covered employees" with UAW, IUE, or 
USWA (but not the splinter unions), should the Delphi hourly plan be 
frozen or terminated.[Footnote 10] Covered employees included those 
who had been represented by these unions as GM workers and now as 
Delphi workers with no break in employment or seniority as of May 28, 
1999. Salaried employees and hourly employees not in the three unions 
were not covered by top-up agreements. 

Over the period 2001 to 2005, Delphi suffered large losses, and the 
company filed for Chapter 11 bankruptcy in October 2005, although it 
continued to operate.[Footnote 11] Beginning in the fall of 2008, 
economic conditions deteriorated throughout the auto industry, 
affecting both Delphi and GM. GM's deteriorating financial condition 
in the fall of 2008 led the company to seek assistance from Treasury 
through the Automotive Industry Financing Program (AIF[Footnote 12]P). 
As a condition of receiving this assistance, GM was required to 
develop a restructuring plan to identify how the company planned to 
achieve and sustain long-term financial viability. In April and May 
2009, Treasury worked with GM to develop a restructuring plan through 
the Presidential Task Force on the Auto Industry and its staff. On 
June 1, 2009, GM filed for bankruptcy and sought the approval of the 
bankruptcy court for the sale of substantially all of the company's 
assets to a new entity ("new G[Footnote 13]M"). After the sale of the 
assets in July 2009, new GM began operating with substantially less 
debt and Treasury received 60.8 percent equity and $2.1 billion in 
preferred stock in the new GM, and a $6.7 billion GM debt obligation. 

Soon after, PBGC terminated Delphi's six DB plans (Delphi having 
acquired four more since the spin-off from GM), effective July 31, 
2009, with almost 70,000 participants (see table 1). According to 
PBGC, as of the termination date, the Delphi plans were underfunded by 
approximately $7.2 billion, of which PBGC insurance would cover an 
estimated $6.0 billion. In October 2009, after 4 years in bankruptcy, 
Delphi completed its reorganization when Delphi Automotive LLP ("new" 
Delphi), a United Kingdom limited partnership, purchased most of 
Delphi's assets and GM purchased 4 other Delphi sites. "Old" Delphi 
became DPH Holdings Corp., an entity set up to sell or dispose of any 
remaining assets. 

Table 1: Terminated Delphi Defined Benefit Plans, as of July 31, 2009: 

Plan: Delphi Hourly-Rate Employees Pension Plan (hourly plan); 
Number of participants: 47,176. 

Plan: Delphi Retirement Program For Salaried Employees (salaried plan); 
Number of participants: 20,203. 

Plan: Packard-Hughes Interconnect Non-Bargaining Retirement Plan; 
Number of participants: 1,383. 

Plan: ASEC Manufacturing Retirement Program; 
Number of participants: 533. 

Plan: Packard-Hughes Interconnect Bargaining Retirement Plan; 
Number of participants: 165. 

Plan: Delphi Mechatronic Systems Retirement Program; 
Number of participants: 148. 

Source: Pension Benefit Guaranty Corporation (PBGC). 

[End of table] 

ERISA Guarantee Limits, Benefit Determination: 

PBGC was created as a government corporation by the Employee 
Retirement Income Security Act of 1974 (ERISA)[Footnote 14] to help 
insure the retirement income of U.S. workers with private-sector 
defined benefit plans. Under PBGC's single-employer insurance program, 
if a company's pension plan has inadequate funds to pay all promised 
benefits, plan sponsors meeting certain criteria can seek to terminate 
a plan through a "distress" termination.[Footnote 15] Under certain 
circumstances, PBGC may also decide to terminate an underfunded plan. 
[Footnote 16] In all these situations, PBGC is generally appointed 
trustee of the plan, as provided under ERISA, and assumes 
responsibility for paying benefits to the participants. 

PBGC pays participants' benefits only up to certain limits set forth 
by ERISA and related regulations. Participants whose benefits under 
the plan would otherwise exceed these statutory limits may have their 
benefits reduced to the guaranteed amount, unless the plan has 
sufficient assets to pay the nonguaranteed portion of their benefits, 
either in part or in full. These guarantee limits include the phase-in 
limit, the accrued-at-normal limit, and the maximum limit, as 
illustrated in table 2.[Footnote 17] 

Table 2: Types of Guaranteed Benefit Limits under ERISA: 

Maximum limit[A]: 
* The guaranteed benefit cannot exceed the statutory maximum, adjusted 
annually, at the time the plan terminates; 
* In 2009 (the year Delphi's plans were terminated), the maximum was 
$54,000 per year for a person retiring at age 65 and with no survivor 
benefit (that is, a single-life annuity); 
* The maximum is lower for those retiring under age 65 or with a 
survivor benefit. 

Phase-in limit[B]: 
* The guaranteed benefit cannot include any benefit increase 
implemented through a plan amendment that was made within 1 year of 
the date of the plan termination; 
* For benefit improvements that became effective more than 1 year but 
less than 5 years prior to the plan's termination, the guaranteed 
amount is the larger of 20 percent of the benefit increase or $20 per 
month of the increase for each full year the increase was in effect. 

Accrued-at-normal limit[C]: 
* The monthly guaranteed benefit cannot be greater than the monthly 
benefit provided as a straight-life annuity (that is, a periodic 
payment for the life of the retiree, with no additional payments to 
survivors) available at the plan's normal retirement age; 
* The portion of any combined early retirement benefit and 
supplemental benefit that exceeds the normal retirement age straight 
life annuity is not guaranteed. 

Source: ERISA, PBGC's implementing regulations, and related documents. 

[A] 29 U.S.C. § 1322(b)(3); 29 C.F.R. § 4022.23 (2011). 

[B] 29 U.S.C. § 1322(b)(1) and (7); 29 C.F.R. § 4022.25 (2011). 

[C] 29 C.F.R. § 4022.21 (2011). 

[End of table] 

Determining participants' benefit amounts following plan termination 
is a complex process. It begins with PBGC gathering extensive data on 
plans and individuals' work and personnel histories, and determining 
who is eligible for benefits under a plan, which can be more 
complicated if the company or plan has a history of mergers or 
elaborate structure or is missing data. It requires understanding plan 
provisions that vary from plan to plan and can be voluminous, applying 
the ERISA guarantee limits to each individual's benefit, valuing plan 
assets and liabilities, and determining which participants may receive 
additional benefits from any assets PBGC may recover from the sponsor. 
Final determination of benefits can take years, especially in a large, 
complex plan.[Footnote 18] If the participant is already retired, or 
retires before the process is complete, PBGC makes payments to the 
retiree initially based on an estimate of the final benefit amount. 
Once the process is complete, PBGC notifies each participant of the 
final benefit amount through a "benefit determination letter." 

PBGC Finances and Governance: 

As of September 30, 2011, PBGC insured the benefits of about 44 
million workers and retirees in more than 27,000 private DB plans. 
PBGC receives no funds from general tax revenue and is financed by 
premiums paid by DB plan sponsors, investment income, and assets that 
PBGC acquires when it assumes control of a plan.[Footnote 19] As of 
the end of fiscal year 2011, PBGC had terminated and trusteed a total 
of 4,300 plans, and its net accumulated financial deficit totaled $26 
billion.[Footnote 20] Additionally, at fiscal year-end, PBGC's 
estimate of total plan underfunding in plans sponsored by financially 
risky single-employer program companies totaled approximately $227 
billion, up significantly from $170 billion the year before. 

PBGC is governed by a three-member board of directors consisting of 
the Secretaries of the Treasury, Labor, and Commerce, who are 
responsible for establishing and overseeing the policies of the 
agency.[Footnote 21] According to PBGC, PBGC's director is responsible 
for managing PBGC's day-to-day operations, including, according to 
PBGC, such decisions as whether and when to terminate particular 
pension plans.[Footnote 22] We designated PBGC's single-employer 
pension insurance program as "high risk" in 2003, including it on our 
list of major programs that need urgent attention and transformation. 
[Footnote 23] In 2007 and 2008, we reported that PBGC's board had 
limited time and resources to fulfill its responsibilities.[Footnote 
24] The program, along with PBGC's other insurance program, remains 
high risk due to an ongoing threat of losses from the terminations of 
underfunded plans. 

Treasury's Multiple Roles: 

In previous reports, we also have examined the challenges posed to 
Treasury due to its multiple roles as a private pension regulator 
[Footnote 25] and a GM shareholder, as well as having its Secretary 
serve on the PBGC board.[Footnote 26] In its role on PBGC's board and 
as a pension regulator, Treasury has an interest in protecting the 
viability of private defined benefit pension plans and the retirement 
incomes of plan participants. But as a GM shareholder, Treasury has an 
interest in the financial well-being of GM. Recognizing the potential 
for interested parties to perceive possible conflicts, we reported 
that Treasury has taken several steps to mitigate this risk. For 
example, the department adopted core principles to guide its oversight 
of its investments under TARP and limit its involvement in day-to-day 
operations of companies. The department also has taken steps to 
establish a protective barrier between Treasury officials who make 
policy-related decisions with respect to investments in the automakers 
and the Treasury officials who are responsible for regulating pensions 
or overseeing the operations of PBGC. Nevertheless, we noted that the 
tensions inherent in Treasury's multiple roles remained.[Footnote 27] 
In one previous report, we concluded that Treasury's investment in the 
auto companies created an enhanced need for transparency, and we 
recommended that Treasury should regularly communicate to Congress 
about TARP activities to ensure accountability and provide added 
assurances that the taxpayers' investment is being appropriately 
safeguarded.[Footnote 28] In a subsequent report, we reiterated this 
recommendation, and noted that by providing a more complete picture of 
the companies' financial performance, Treasury also could help 
mitigate potential or perceived tensions in its multiple 
roles.[Footnote 29] Although Treasury had initially expressed concerns 
about disclosing proprietary information in a competitive market, it 
agreed to provide information on its oversight of the companies' 
performance that balances the need for transparency with the need to 
protect certain proprietary business information.[Footnote 30] 

Threat of Increased Losses Led PBGC to Terminate Delphi Pension Plans: 

PBGC's decision to terminate the Delphi DB plans was precipitated by 
Delphi's inability to fund or maintain its plans and by the threat of 
increased losses from Delphi's impending loan default and possible 
liquidation. Treasury, as GM's primary lender in bankruptcy, played a 
significant role in helping GM resolve the Delphi bankruptcy to arrive 
at the "best resolution" from GM's perspective[Footnote 31]. However, 
with regard to GM's decisions regarding the assumption of Delphi's 
plans and top-up agreements, Treasury played an advisory role only, 
according to GM and Treasury officials. Similarly, according to PBGC 
officials, PBGC independently decided to terminate the Delphi plans. 
The documents we reviewed, including GM and Delphi SEC filings and 
PBGC internal records, are consistent with these statements. 

PBGC Initially Focused on Delphi or Another Company Continuing the 
Plans: 

PBGC officials said the agency would have preferred to have Delphi 
emerge from bankruptcy and continue to sponsor the plans rather than 
terminate them. Delphi had announced in March 2006 that a key 
objective in restructuring was to continue to sponsor both the hourly 
and salaried DB plans. Therefore, PBGC's activities were focused on 
allowing the plans to continue after Delphi exited bankruptcy and 
having a reorganized Delphi continue to fund the plans. While PBGC has 
authority under ERISA to involuntarily terminate a plan that fails to 
meet certain conditions,[Footnote 32] PBGC officials said that they 
hoped that avoiding termination would save both the agency and plan 
participants from potential losses from unfunded plan benefits. 

The vision was not realized, however. The Delphi bankruptcy court 
confirmed Delphi's reorganization plan in January 2008, but on April 
4, 2008, Delphi's investors retracted an offer that would have 
executed the plan and prevented the termination of its pension plans. 
Delphi also negotiated with GM, Delphi's former parent company, to 
assume Delphi's hourly plan, but these efforts were only partially 
successful. Under a change to an agreement initially negotiated 
between the companies in 2007, GM would assume the hourly plan in two 
phases; this would reduce Delphi's overall pension liabilities and 
make it more attractive to investors, while Delphi would continue 
sponsoring the salaried plan. After making some changes to the 
agreement, the first phase occurred in September 2008, transferring 
approximately $2.1 billion in net liabilities from Delphi to GM. 
However, the second phase, in which GM would have absorbed 
substantially all of the remaining hourly plan liabilities, was 
conditional on Delphi successfully reorganizing.[Footnote 33] In July 
2009, after Delphi's attempts to reorganize failed, and with GM in its 
own bankruptcy, GM decided not to take on the remaining liabilities of 
Delphi's hourly plan. According to representatives of GM, after it was 
clear Delphi would not be able to reorganize, Delphi asked GM to take 
the salaried plan as well; however, GM declined. 

Lack of a Willing Sponsor and the Risk of Additional Losses Prompted 
PBGC to Terminate: 

By 2009, PBGC determined that the economic decline and the collapse of 
the U.S. auto industry had diminished the likelihood that Delphi, GM, 
or another company would be able and willing to sponsor Delphi's 
plans. Moreover, it became apparent to PBGC officials that PBGC's 
potential losses could grow if it waited. Delphi net sales, already on 
a steady decline since 2003, had fallen 50 percent between 2008 and 
2009, and funding for Delphi's plans had been eroding since 
2007.[Footnote 34] Delphi's largest customer, GM, amidst the lowest 
per-capita vehicle sales in 50 years, requested financial assistance 
from the U.S. government in December 2008. These conditions diminished 
the likelihood that Delphi would be able to continue operating and 
maintain its pension plans. 

According to PBGC officials, the likelihood that Delphi would default 
on its debtor-in-possession (DIP) loan, and the potential impact on 
PBGC recoveries, moved them in April 2009 to decide to terminate the 
Delphi plans. Delphi's SEC filing that month stated that Delphi's 
short-term loan from its DIP lenders was due to expire, and that 
extension of the loan was conditional on Delphi (1) delivering the 
lenders terms, agreed to by Treasury and GM; and (2) finalizing GM's 
contributions to the resolution of Delphi's bankruptcy. The filing 
noted that failure to meet these terms would trigger a requirement 
that Delphi make a $117 million repayment obligation on April 20. With 
Delphi unlikely to make this payment, it was possible that the lenders 
would foreclose on Delphi assets held as collateral. Foreclosure would 
have threatened PBGC's ability to recover Delphi Corporation assets on 
behalf of its plans, which would in turn have increased PBGC's and 
Delphi plan participant losses from plan termination. With a 
deteriorating auto industry and no foreseeable sponsor for the Delphi 
plans, and with potential recoveries threatened, PBGC concluded that 
the agency's long-run loss would increase if the plans were not 
terminated. 

Ultimately, however, PBGC postponed termination. The urgency to 
terminate in April, was reduced after Delphi's DIP lenders offered 
PBGC a 5-business day notice prior to foreclosing, fearing, according 
to PBGC, that termination of Delphi's pension plans would reduce 
Delphi's value. In a June 1, 2009, press release, Delphi stated that 
the hourly plan would "be addressed" by GM and that PBGC "may" 
terminate the salaried and four smaller plans. According to Treasury, 
PBGC later confirmed that GM was not an alternative sponsor for the 
Delphi hourly plan. On June 30, 2009, a meeting took place between 
PBGC and Treasury to discuss the Delphi plans; according to PBGC, 
Treasury informed PBGC officials that GM would not assume the 
remaining Delphi hourly pension liabilities. Finally, on July 15, 
2009, Delphi's DIP lenders gave PBGC a notice of foreclosure under the 
April agreement. With no willing and viable sponsor, PBGC officials 
expected the plans would be abandoned with no sponsor to pay benefits 
as they came due. On July 22, 2009, PBGC announced that Delphi's plans 
would be terminated. The termination date was set to be July 31, 2009, 
and PBGC officially became the trustee of the plans on August 10, 
2009. Delphi's claim was the second largest in PBGC's history, 
following United Airlines as the largest. 

Our examination of PBGC termination decisions for nine of its ten 
largest insurance claims (Delphi's being the tenth) shows the agency 
making assessments similar to those it made for the Delphi pension 
plans. In each case, we found that PBGC evaluated the future viability 
of the plans when making such decisions. For example, PBGC considered 
the likelihood of the company securing investment or more generally 
exiting bankruptcy as the plan's sponsor, or, alternatively, of an 
asset purchaser assuming the plan. PBGC also assessed future plan 
funding. For example, staff recommended termination of Weirton Steel's 
plan expecting that plan funding would soon decline. Weirton Steel, 
pursuing two tracks to exit bankruptcy, both of which assumed plan 
termination, filed an emergency motion seeking court approval to lay 
off 175 management employees, which would have triggered additional 
benefits totaling up to $270 million. PBGC expected the layoffs to 
significantly reduce the funding of Weirton's already underfunded 
pension plan and terminated the pension plan before the plan's funding 
was affected. 

Treasury Was Involved as GM Determined How Best to Resolve the Delphi 
Bankruptcy: 

As GM's primary lender in bankruptcy, Treasury played a significant 
role in helping GM resolve the Delphi bankruptcy in terms of GM's 
interests. Treasury's guiding principle was to see the bankruptcy 
resolved with the least possible amount of investment by GM while 
still preserving GM's supply chain. However, with regard to GM 
decisions about the Delphi pension plans--their sponsorship and the 
decision to honor existing top-up agreements--court filings and 
statements from GM and Treasury officials support that Treasury 
deferred to GM's business judgment. According to Treasury officials, 
Treasury agreed with GM's assessment that the company could not afford 
the potential costs of sponsoring the Delphi hourly plan. With regard 
to the top-ups, Treasury officials said that while Treasury did not 
explicitly approve or disprove of GM's agreement to honor previously 
negotiated top-up agreements with some unions, it agreed that GM had 
solid commercial reasons to enter into such agreement. Similarly, PBGC 
officials have maintained that their agency's decision to terminate 
the Delphi plans was made independent of input from Treasury. 

Decisions Related to Plan Sponsorship: 

From Treasury's initial discussions about Delphi's pensions with PBGC 
in April 2009 until after GM's bankruptcy filing on June 1, 2009, 
Treasury had anticipated that Delphi's salaried pension plan would be 
terminated by PBGC, but that GM would assume the remaining portion of 
Delphi's hourly plan, as called for in phase 2 of the September 2008 
agreement. With respect to the salaried plan, according to Treasury 
officials, Treasury agreed with GM's rationale not to assume the now 
underfunded Delphi salaried plan, since that plan had been fully 
funded when GM transferred it to Delphi in 1999.[Footnote 35] With 
respect to the hourly plan, however, a Treasury official's deposition 
indicates that Treasury thought it was reasonable for GM to assume the 
Delphi hourly plan for UAW-represented workers, given the UAW's 
continuing role with the new GM and the fact that the hourly plan, 
which covered both the UAW and other union-represented workers, had 
not been fully funded at the time the plan was transferred from GM to 
Delphi in 1999.[Footnote 36] 

According to our review of the records, Treasury was involved in 
discussions with PBGC and GM prior to GM's bankruptcy filing, on how 
to address Delphi's pensions. Specifically, according to the Treasury 
official's deposition, initial discussions with PBGC, GM, and Treasury 
in April and May 2009 centered on trying to reach an agreement under 
which, among other things, the Delphi salaried plan would be 
terminated and GM would assume the hourly pension plan. According to 
the deposition, as of May 28, 2009, there was a general agreement with 
PBGC that, if GM had been willing to take on the hourly plan, the 
salaried plan would be terminated and PBGC would have an 
administrative claim on the Delphi bankruptcy. In exchange, PBGC would 
release the liens on Delphi's foreign assets and have an unsecured 
claim for an undefined amount. According to PBGC officials, there were 
discussions in April and May 2009 around the topic of how to deal with 
Delphi's pension plans in light of the collapse of the auto market and 
growing concerns about Delphi's inability to maintain its pension 
plans and imminent liquidation, as well as GM's own financial 
difficulties and impending bankruptcy. However, PBGC officials told us 
that at this time, they had not reached any agreement with GM or 
Delphi regarding the future of the Delphi pension plans or settlement 
of PBGC liens and other claims that might arise from the termination 
of one or more of Delphi's pension plans. 

According to court filings, GM officials first informed Treasury that 
they had concerns about taking on the hourly plan and had not built 
the cost of doing so into its restructuring plan on June 3, 2009--
shortly after GM's bankruptcy filing. In June 2009, GM developed and 
provided Treasury with an assessment of the costs of Delphi's 
pensions, which explained that the restructuring plan did not assume 
the transfer of remaining Delphi hourly or salaried plans. The 
assessment also stated that, subject to certain conditions, GM was 
obligated to absorb the second transfer of Delphi's hourly plan but 
did not expect Delphi to meet those conditions[Footnote 37]. GM also 
noted that it was not obligated to absorb Delphi's salaried plans. 
After reviewing GM's calculations and engaging in discussions with 
GM's pension team, Treasury agreed with GM's assessment that taking on 
the Delphi hourly plan was a "3 billion dollar liability that General 
Motors could not afford."[Footnote 38] In a legal brief, Treasury has 
asserted that the department did not dictate what should be done with 
the Delphi pensions and that Treasury agreed with GM's decisions. 
[Footnote 39] 

According to PBGC, Treasury did not play an active role in PBGC's 
decision to terminate the Delphi plans, although the Secretary of the 
Treasury is one of PBGC's three PBGC board members. Specifically, 
according to PBGC officials, PBGC's director informed the board of 
PBGC's decision to seek termination of the Delphi plans, gave the 
board advance notice of its subsequent implementation of that 
decision, and routinely kept the board informed of the agency's 
actions in the Delphi bankruptcy case, consistent with PBGC's practice 
in other large cases. The law gives the board responsibility to 
establish and oversee PBGC policies,[Footnote 40] but according to 
PBGC, the board decides broad policy issues that may arise from cases 
without getting involved directly in those cases. For their part, 
Treasury officials acknowledged that the department had multiple roles 
in this process by virtue of its roles in PBGC oversight and in 
managing the U.S. investment in new GM, but noted that Treasury does 
not communicate with PBGC about its GM investment activities.[Footnote 
41] Moreover, in response to questions from Congress, the Treasury 
Secretary stated that Treasury did not make the decision to terminate 
Delphi's pension plans.[Footnote 42] 

Decisions Related to Top-Up Agreements: 

Although GM decided not to assume the second installment of Delphi's 
hourly plan, it did decide to honor existing top-up agreements for 
commercial reasons that Treasury found reasonable. As noted in a 
Treasury official's deposition, during GM's bankruptcy process, GM was 
prepared to honor the obligation of providing top-ups to Delphi UAW 
retirees, while the situation was less clear regarding comparable 
agreements with IUE and USWA. GM officials told us that the company 
agreed to honor the top-up agreement with the UAW during its 
restructuring because of its dependence on the union, whose members 
made up a substantial part of GM's workforce. GM agreed to provide top-
ups to the Delphi UAW retirees as part of GM's master sale and 
purchase agreement, to which Treasury gave its approval[Footnote 43]. 
The agreement did not include top-ups for IUE and USWA-represented 
employees, nor for the splinter unions or the salaried employees, who 
had no previous top-up agreements with GM. 

While new GM maintained that it was not obligated to provide top-ups 
to Delphi IUE and USWA retirees, it did have reason to want to resolve 
Delphi's bankruptcy, given GM's reliance on Delphi for parts.[Footnote 
44] Moreover, IUE and USWA, which still represented part of Delphi's 
workforce, needed to give their consent to finalize the sale of assets 
in Delphi's bankruptcy. According to a GM official's court 
declaration, a prolonged cessation in the supply of parts from Delphi 
to GM would have had a "devastating effect on GM, its ability to 
reorganize, and the communities that depend on employment by GM and 
its community of parts suppliers."[Footnote 45] According to a 
Treasury official's deposition, Treasury was kept apprised of GM's 
ongoing bargaining with IUE and USWA on a variety of issues, including 
the top-ups.[Footnote 46] Additionally, according to Treasury 
officials, Treasury's consent for transactions greater than $100 
million, which had been required prior to GM's bankruptcy, was not 
required of new GM and therefore, was not required when the settlement 
agreement was signed, 2 months after new GM began operations. 
Negotiations resulted in an agreement, on September 10, 2009, between 
new GM, old GM, IUE, and USWA that, among other things, honored the 
top-ups to the retirees of Delphi who were represented by these unions 
and who were covered by the 1999 top-up agreements. According to the 
agreement, the parties entered into it after consideration of the 
factual and legal arguments regarding these issues, as well as the 
costs, risks, and delays associated with litigating these issues. 

Although Treasury officials said that Treasury did not explicitly 
approve or disapprove of GM providing top-ups to the Delphi UAW, USWA, 
and IUE retirees, Treasury did subsequently comment on GM's decision. 
In a legal brief, Treasury stated that GM had solid commercial reasons 
for providing the top-ups.[Footnote 47] Specifically, Treasury stated 
that its aim in negotiating the details of GM's reorganization plan 
was to ensure that new GM would assume only those liabilities of old 
GM that were "commercially necessary" in order for new GM to operate. 
Treasury noted in the brief that because of new GM's dependence on the 
UAW workforce and the costs, risks, and delays associated with 
litigating USWA's and IUE's claims related to the Delphi bankruptcy, 
new GM had solid commercial reasons to agree to provide the top-ups to 
the Delphi UAW, USWA, and IUE retirees. Additionally, Treasury 
officials noted that, unlike the hourly plan, the salaried plan was 
fully funded at the time GM transferred it to Delphi, and that because 
GM was never obligated to provide top-ups to the salaried or other 
retirees not represented by UAW, IUE, and USWA. 

As a result of GM's decisions to pay top-up benefits to those 
participants covered by the agreements and to take back a portion of 
the Delphi hourly plan in September 2008, GM will bear some of the 
costs of Delphi's unfunded pension liabilities (see figure 1). 
Retirees who experience benefit reductions that are not topped up by 
GM will also bear a portion of the cost through their reduced 
benefits. However, PBGC will bear the biggest burden--about $6 billion 
in unfunded guaranteed benefits across all six of Delphi's DB plans. 

Figure 1: Who Is Bearing the Cost of Delphi Pension Plans' Unfunded 
Liabilities: 

[Refer to PDF for image: illustration] 

General Motors (GM): 
Net liabilities assumed when GM accepted the transfer of about a 
fourth of Delphi's hourly plan in September 2008; 
$2 billion. 

Estimate of what GM expects to pay in top up benefits to Delphi hourly 
employees covered by these agreements;[A] 
$1 billion. 

Pension Benefit Guaranty Corp. (PBGC): 
Estimate of what PBGC expects to pay for unfunded guaranteed benefits 
that it must pay under ERISA; 
$6 billion. 

Delphi plan participants: 
Estimate of the reductions in benefits expected to be borne by 
participants not covered by top-ups; Less than $1 billion. 
 
Sources: GAO analysis of PBGC and GM data. 

[A] GM estimated the cost for top-up benefits in December 2010. GM's 
top-up estimate is higher than PBGC's estimate for the hourly plan's 
total amount of unfunded nonguaranteed benefits because GM will pay 
some benefits not included in PBGC's calculations. For example, unlike 
PBGC's estimate, GM's estimate includes obligations to provide up to 7 
years of accrued benefits for certain employees covered under the top-
up agreement who were not eligible to retire as of the plan 
termination date, but who became (or will become) eligible to retire 
under a normal or voluntary retirement during this 7-year window. In 
addition, GM's estimate includes obligations to provide covered 
employees who retired under the mutually satisfactory retirement (MSR) 
option, for which GM will pay the difference between the PBGC deferred 
vested pension benefit and the Delphi MSR benefit amount. 

[End of figure] 

PBGC Pursued Claims on Delphi's Assets, Resulting in between $600 
Million and $650 Million in Recoveries: 

PBGC took actions during Delphi's bankruptcy to protect plan funding 
and recover assets from Delphi, eventually recovering between $600 and 
$650 million against the $7.2 billion in total unfunded plan benefits. 
PBGC negotiated value for its claims and liens with Delphi and GM, 
releasing them for a settlement generating cash and other recoveries. 
The process for distributing these recoveries is laid out in 
ERIS[Footnote 48]A, PBGC regulations,[Footnote 49] policies, and 
procedures. Because of the large gap between plan assets and 
liabilities in Delphi's plans relative to PBGC's recoveries, its 
recoveries are expected to have only a modest impact on the benefits 
of only some participants. 

PBGC Pursued Statutory Claims Arising against Delphi's Assets: 

Upon the termination and trusteeship of an underfunded single-employer 
plan, PBGC generally takes control of all plan assets, but PBGC also 
has authority to recover additional money from company assets outside 
of its pension plans. ERISA provides that when underfunded single-
employer plan is terminated, the plan sponsor and other entities under 
common control (the controlled group)[Footnote 50] are "jointly and 
severally"[Footnote 51] liable to PBGC for any unpaid premiums 
[Footnote 52] and the amount of any unfunded benefit liability. 
[Footnote 53] In addition, a plan sponsor is required under ERISA to 
periodically make certain minimum contributions to its plan,[Footnote 
54] and--along with other members of the controlled group--is liable 
to a plan for any required contributions not made by the date due. 
[Footnote 55] 

ERISA imposes a lien that can only be officially filed 
("perfected")[Footnote 56] by PBGC on behalf of a plan in the amount 
of the aggregate missed contribution payments, when the total of those 
missed payments exceeds $1 million.[Footnote 57] PBGC first filed 
liens on behalf of the Delphi plans, for missed required contributions 
of $75,177,000, in March 2006.[Footnote 58] From 2006 to 2009, PBGC 
filed liens on behalf of the Delphi plans in response to Delphi's 
failing to contribute to its plans in the amounts required by 
statutory minimum funding standards. As of the termination of the 
Delphi plans in July 2009, PBGC held $195.9 million in perfected liens 
on behalf of the salaried plan and a combined $9.2 million on behalf 
of Delphi's smaller pension plans, for a total of $205 million in 
secured claims. PBGC officials told us they filed these liens for 
missed contributions only on the assets of Delphi's foreign 
subsidiaries because Delphi's domestic assets were shielded from PBGC 
liens by the automatic stay in Delphi's bankruptcy.[Footnote 59] In 
addition, prior to the transfer of $2.1 billion in net liabilities to 
GM's hourly plan, PBGC also held liens on behalf of Delphi's hourly 
plan, reflecting missed required contributions to that plan. However, 
according to PBGC, the transfer of a portion of Delphi's hourly plan 
in September 2008 eliminated the hourly plan's accumulated funding 
deficiency, eliminating the legal basis for any liens for missed 
contributions up to that point in time. Following the transfer, the 
contribution due to Delphi's hourly plan for the final plan year was 
$194 million. However, according to PBGC officials, because no 
quarterly contributions were due, that final $194 million catch-up 
payment was not due until June 15, 2010, well after the plan was 
terminated, and therefore, a lien did not arise. 

ERISA also establishes a lien on behalf of PBGC in the amount of any 
unfunded benefit liability as of the plan's termination date, up to an 
amount not in excess of 30 percent of the controlled group's net 
worth[Footnote 60] However, when a firm is in bankruptcy--as was the 
case with Delphi--PBGC is barred from perfecting a lien under this 
provision. According to PBGC officials, although liens could have 
arisen under this provision on Delphi's foreign controlled group 
members after the Delphi plans were terminated, they concluded that 
PBGC could maximize recoveries by achieving a settlement prior to 
termination, in part because they were concerned about the potential 
breakup of Delphi's controlled group and the impact this would have on 
recoveries. 

PBGC Negotiated the Value of Its Claims with Delphi and GM: 

According to information from PBGC, in May 2009, PBGC, Delphi, GM and 
Treasury met to discuss the status of negotiations surrounding 
Delphi's bankruptcy, including the pension plans. Treasury 
participated in those negotiations as the facilitator between GM and 
PBGC regarding Delphi pension issues.[Footnote 61]According to a GM 
official's court declaration, neither GM nor presumably any other 
potential purchaser was willing to purchase Delphi's assets while they 
were subject to the threat of liens PBGC held on behalf of the 
underfunded Delphi plans. Therefore, GM's obligations to Delphi were 
conditioned upon PBGC agreeing to remove these liens on Delphi's 
assets. During the negotiations, GM recognized that it might be 
necessary for it to make a cash payment to the PBGC or assume some 
portion of Delphi's unfunded pension liabilities. GM noted it would 
only make such a payment if necessary to help Delphi's reorganization 
and the payment was clearly outweighed by the benefits GM would 
receive from Delphi's reorganization. GM also noted that any 
contributions under an agreement with PBGC would be subject to 
Treasury's consent if funds in a restricted escrow account, over which 
Treasury held approval rights, would be used for such contributions. 
[Footnote 62] 

PBGC and Delphi reached an agreement on July 21, 2009, and PBGC 
announced it was terminating Delphi's plans the following day. PBGC 
received a membership interest in new Delphi, which gave it rights to 
some of the initial profit distributions from post-bankruptcy Delphi. 
PBGC actuaries valued the interest at $500 to $600 million. GM also 
paid PBGC $70 million in cash. In exchange, PBGC released $205 million 
in liens on Delphi's foreign assets (which PBGC considered worth 
substantial negotiating leverage in maximizing recoveries) and 
released Delphi controlled group members from any potential future 
PBGC claim that might arise against them under any circumstances. PBGC 
also settled with Delphi and received a $3 billion general unsecured 
claim in Delphi's bankruptcy in exchange for releasing all of its 
other claims in the case (see figure 2). 

In March 2011, PBGC redeemed its membership interest from new Delphi 
for $594 million. Soon after, in April 2011, PBGC sold its remaining 
$3 billion general unsecured claim against old Delphi to Credit Suisse 
Loan Funding, LLC for $53 million--roughly 2 cents on the dollar. 
Together, PBGC's recoveries of Delphi Corporation assets totaled 
approximately $717 million--or an estimated $600 million to $650 
million when discounted to its value as of the date of plan 
termination, as required under ERI[Footnote 63]SA. Based on these 
values, recovery ratios for Delphi's hourly and salaried plans are 
estimated to ultimately be just over 6 percent. 

Figure 2: PBGC Asset Recoveries in Delphi's Bankruptcy: 

[Refer to PDF for image: illustration] 

Claim origin: 
Delphi's unfunded benefit liabilities; 
Settlement agreement (signed July 21, 2009): $7 billion: General 
unsecured claim on Delphi's bankruptcy estate;   

Claim origin: 
Delphi's missed minimum funding contributions to its pension plans; 
Settlement agreement (signed July 21, 2009): $205 million; Secured 
claims against Delphi's foreign affiliates; 

Combined claims: $7.2 billion. 

Assets obtained from settlement: 
General unsecured bankruptcy claim: $3 billion;
Resulting cash recovery: $53 million. 

Assets obtained from settlement: 
Cash from GM: $70 million; 
Resulting cash recovery: $70 million. 

Assets obtained from settlement: 
Membership interest in new Delphi; 
Resulting cash recovery: $594 million. 

Total nominal recovery: $717 million. 

Total recovery after discounting to the date of plan termination: $600-
$650 million. 

Sources: PBGC and court documents. 

[End of figure] 

The recovery ratios in Delphi's case are comparable to those we found 
in the nine other companies on PBGC's top-10 list of largest claims, 
although the circumstances surrounding each recovery process are 
unique. As it did in Delphi's case, PBGC had claims on non-debtor 
corporate subsidiaries in recovery efforts against three other large 
terminations we examined: Weirton Steel, Bethlehem Steel, and National 
Steel. Also, as it did with Delphi, PBGC entered into a negotiated 
settlement agreement with eight of the other nine companies on PBGC's 
top-10 list of largest claims.[Footnote 64] 

We reviewed documents for the 29 plans across these nine firms, and 
found that the recovery ratios ranged from 0 percent to 38.5 percent. 
Recovery ratios appeared to vary by industry for the other nine 
companies, all of which are airlines or steel companies. Of the 13 
terminated steel plans we reviewed, 9 had PBGC recovery ratios less 
than 3 percent, and of the 11 large airline plans we reviewed, 8 had 
recovery ratios over 8 percent. We also found that PBGC generally 
achieved higher recovery ratios for plans of companies that were in a 
position to emerge from bankruptcy after their plans' termination than 
those of companies positioned to sell their assets or liquidate. 

We also sought to compare PBGC's recovery efforts against Delphi with 
other terminations involving companies with foreign assets. In 
response to our request for cases involving foreign liens, PBGC did 
not identify any of the firms involving their 10 largest claims, 
[Footnote 65] but instead provided two other case examples. In one 
case, Hayes Lemmerz International, Inc., PBGC entered into a 
settlement (along with the other creditors) for claims on the 
company's foreign subsidiaries to recover funds on behalf of the 
company's pension plan. PBGC's claims in this case total $113.1 
million, and expected recoveries total $21.7 million, about 19 cents 
per dollar claimed. In the other case, Collins & Aikman Corporation, 
the company's Canadian and Mexican subsidiaries represented a 
potentially large portion of the net worth in the controlled group. As 
in Delphi's case, PBGC terminated the Collins & Aikman's pension plan 
when it expected that these foreign assets would leave the controlled 
group and reduce PBGC recoveries. PBGC's claims in this case total 
$225.2 million, and recoveries total $8.7 million, a recovery ratio of 
less than 4 percent.[Footnote 66] 

Recoveries Will Result in Minimal Benefit Increases beyond Guaranteed 
Benefit Amounts: 

A fraction of PBGC's $600 million to $650 million in recoveries will 
go to increase participant benefits beyond the level already 
guaranteed by PBGC, with the rest offsetting PBGC's payment of 
unfunded guaranteed benefits. Recoveries of due and unpaid employer 
contributions are allocated back to the pension plans to which they 
are owed. Based on the liens for missed contributions to the Delphi 
plans, PBGC will allocate $195.9 million of its recoveries to the 
salaried plan, and $9.2 million to the smaller plans from its 
recoveries (see figure 3). 

Figure 3: Distribution of Asset Recoveries by PBGC in Delphi's 
Bankruptcy: 

[Refer to PDF for image: illustration] 

Total recoveries: $600-$650 million. 

Remaining recoveries: $395-$445 million: 
Shared among plans according to the percentage of total Delphi plan 
underfunding represented by each plan; 
To PBGC: Pays portion of unfunded nonguaranteed benefits of: 
Salaried plan share; 
Hourly plan share; 
To participants: Pays a portion of unfunded guaranteed benefits: 
Salaried plan; 
Hourly plan;  
Smaller four plans. 

Due/unpaid employer contributions: $205 million; 
To plan assets[A]: 
Salaried plan: $196 million; 
Hourly plan: $0;  
Smaller four plans: $9 million. 

Source: GAO analysis of PBGC documents, court documents, and 
interviews with PBGC officials. 

[A] Plan assets distributed to unfunded guaranteed and nonguaranteed 
benefits, but under different rules than asset recoveries. 

[End of figure] 

The remaining recoveries, estimated to be between $395 and $445 
million, are allocated among the plans proportionally according to 
each plan's percentage of total remaining unfunded benefit 
liabilities[Footnote 67]. The money allocated to each plan is then 
split between PBGC (to offset its cost of paying unfunded guaranteed 
benefits) and participants (to pay a portion of unfunded benefits 
beyond ERISA's guarantee limits). For plans with more than $20 million 
in unfunded benefit liabilities, as in the case of Delphi's hourly and 
salaried plans, the percentage of participants' nonguaranteed benefits 
PBGC pays depends on the percentage of the plans' unfunded benefit 
liability PBGC is able to recover.[Footnote 68] Remaining recoveries 
go to offset PBGC's loss for paying guaranteed benefits. With 
recoveries of about 6 percent of unfunded liabilities for both 
Delphi's hourly and salaried plans, PBGC would pay about 6 percent of 
all participant unfunded nonguaranteed plan benefits, which are those 
benefits funded neither by plan assets nor guaranteed by PBGC. PBGC 
officials said it is too early in the benefit determination process to 
develop an accurate estimate of total unfunded, non-guaranteed 
benefits, but at this point, PBGC expects that recoveries will 
slightly increase benefits for some participants across Delphi's plans. 

Many Delphi Retirees Are Subject to Benefit Reductions and Only 
Certain Hourly Retirees Are Protected by Union Agreements with GM: 

The benefits provided by PBGC must comply with the limits on 
guaranteed benefits under ERISA, and as a result, the amount 
guaranteed and paid by PBGC to some Delphi retirees will be less than 
the amounts promised by Delphi. However, some Delphi hourly plan 
participants avoided these reductions because they were transferred 
into GM's plan prior to PBGC's termination of the Delphi plan. Some of 
the other hourly plan participants who will receive less from PBGC 
than the amount promised by Delphi will have their losses covered by 
GM because of top-up agreements originally negotiated when Delphi was 
spun off from GM. These participants will receive additional payments 
from GM resulting in their receiving, in total, their full promised 
benefits. But most Delphi employees are not covered by these top-up 
agreements--including about 40 percent of the participants in the 
hourly plan, and all the participants in the salaried and other four 
smaller plans. PBGC's data showed that, as a result of the ERISA 
limits, PBGC has had to reduce benefits for just under half of 
salaried and hourly plan participants already retired and receiving 
pension payments, according to information collected by DSRA. 

ERISA Limits Result in Reductions in Benefits for Many Retirees: 

As of June 2011, after reviewing the benefits promised to and being 
paid to the vast majority of Delphi hourly and salaried participants 
already retired, PBGC data indicate that just under half required 
reductions in their estimated benefit in order to comply with ERISA 
limits (see table 3).[Footnote 69] According to the data, 48 percent 
of hourly retirees and 45 percent of the salaried retirees had their 
estimated benefits reduced because of guarantee limits[Footnote 70]. 
Like those affected by other large terminations, Delphi participants 
who had retired early or had accrued higher benefits were likely to 
have their benefits reduced due to ERISA limits. For example, retirees 
in both plans frequently had benefit reductions because of ERISA's 
accrued-at-normal limit, which can eliminate or substantially reduce 
any early retirement supplemental benefit[Footnote 71]s. Only salaried 
retirees had a high proportion of retirees receiving reductions 
because of ERISA's maximum limit, with 26 percent of them exceeding 
this limit compared with 2 percent of hourly retire[Footnote 72]es. 
Even after applying the ERISA limits, PBGC expects to pay about $6 
billion of the $7.2 billion in unfunded benefits promised to Delphi 
participants, as these benefits fall under the limits and thus are 
guaranteed. 

Table 3: Number and Percentage of Delphi Retirees Subject to 
Reductions in Estimated Benefits Due to ERISA Limits (as of June 1, 
2011): 

Delphi plan[A]: Hourly plan; 
Number of participants: 47,176; 
Number of participants with benefits reviewed by PBGC as of June 1, 
2011[B]: 28,051; 
Number with reductions in benefits: 13,368; 
Percent reviewed with reductions[B]: 48%; 
Percent reviewed with no reductions[B]: 52%. 

Delphi plan[A]: Salaried plan; 
Number of participants: 20,203; 
Number of participants with benefits reviewed by PBGC as of June 1, 
2011[B]: 8,273; 
Number with reductions in benefits: 3,714; 
Percent reviewed with reductions[B]: 45%; 
Percent reviewed with no reductions[B]: 55%. 

Source: GAO analysis of PBGC data. 

[A] In addition to the hourly and salaried plans, Delphi also has four 
other small plans. (See appendix II for estimated benefit reductions 
for all Delphi plans.) 

[B] According to PBGC officials, as of June 2011, they had not yet 
reviewed the benefit amounts for about 2,000 of the 30,000 hourly plan 
participants already receiving payment, but had reviewed the benefit 
amounts for all other salaried plan participants already receiving 
payments. These rates are also subject to change as PBGC determines 
the impact of plan asset recoveries on retirees' benefits and as more 
workers retire and receive estimated reductions and final benefit 
determinations over the next year or more. 

[End of table] 

Based on PBGC's reviews as of June 2011, a higher proportion of Delphi 
retirees have been subject to the guarantee limits compared with 
retirees of most other large plans terminated and trusteed by PBGC. 
While PBGC does not systematically track the number of participants 
affected by guaranteed benefit limits, a study it conducted in 2008 
using a sample of large plans showed that ERISA benefit limits 
resulted in 16 percent of participants receiving reductions. It also 
found that the steel and airline plans, which tend to allow early 
retirement and have generous benefits, had a higher percentage of 
participants experiencing reductions, at 21 percent for steel plans 
and 22 percent for airline plans. Although certain plans for pilots 
have had 60 percent of participants receiving reductions, Delphi's 
current rates of 45 percent of salaried plan participants and 48 
percent of hourly plan participants are higher than most. However, 
over time, the proportion of Delphi retirees with benefit reductions 
is likely to decline. According to PBGC, many participants from the 
salaried plan who were not eligible to retire as of the termination 
date were not entitled under the plan to benefit supplements or 
benefit payments larger than ERISA's maximum limit. Also, some workers 
eligible for these benefits may choose to wait longer to retire to try 
to avoid or mitigate the amount of benefit reductions. 

Recoveries can also mitigate possible benefit losses that have not 
been guaranteed by PBGC. As PBGC is still in the early stages of 
valuing the plan, it has not fully determined the extent to which 
recoveries will impact participants' unfunded nonguaranteed benefits. 
According to a PBGC official, preliminary estimates suggest that PBGC 
recoveries allocated to Delphi participants' benefits will lessen the 
extent of benefit reductions for some participants with benefits at 
the top of the statutory allocation priority category 3--that is, 
those who were retired (or were eligible to retire) at least 3 years 
prior to the date of plan termination for the salaried plan.[Footnote 
73] Most of the other large plans we reviewed had sufficient assets 
and recoveries to partially or fully fund this priority category. (See 
appendix III for the allocation of plan assets and recoveries to the 
priority categories for other large terminations we reviewed.) 

As for the magnitude of benefit reductions, PBGC could not provide 
summary information on the range of retirees' losses. However, 
according to DSRA officials, information they collected indicates that 
salaried retirees under 65 years of age were at risk for "significant 
pension reductions." DSRA requested information on losses from 
approximately 4,000 salaried retirees who may have received reductions 
in benefits as of the first quarter of 2010. The 1,703 who responded 
(or about 8 percent of all salaried plan participants) reported losses 
in benefits ranging from 5 percent to 60 percent, with more than 90 
percent having losses of 10 percent to 40 percent[Footnote 74]. Our 
review of a small judgmental sample of reductions for seven salaried 
retirees showed a range of pension losses from 12 percent to 40 
percent. The salaried retiree who had a 12 percent drop in pension 
benefits lost $349 per month (a decline from $2,944.25 to $2,595.15 
per month) due to the loss of a substantial portion of his early 
retirement supplemental benefit. The salaried retiree who had a 40 
percent drop in pension benefits lost $1,490.67 per month (a decline 
from $3,732.63 to $2,241.96 per month) due to the loss of benefits in 
excess of the maximum limit based on his age at retirement and his 
annuity that provided survivor benefits. 

Agreements between GM and Unions Protect Certain Hourly Retirees from 
Benefit Loss: 

Agreements negotiated between GM and various Delphi unions have 
protected certain participants in Delphi's hourly plan from benefit 
loss due to termination of their underfunded plan. These agreements 
include the arrangement that resulted in the transfer of 14,413 (about 
22 percent) of Delphi's hourly plan participants back to GM's hourly 
plan in September 2008, as well as the provision of pension top-ups 
covering reductions in benefits resulting from the application of 
ERISA limits.[Footnote 75] But most Delphi employees are not protected 
by these agreements--including a substantial portion of hourly plan 
participants and all the participants in the salaried plan and other 
smaller Delphi pension plans. 

In 2007 and 2008, as part of Delphi's bankruptcy and restructuring 
plan at the time, GM and Delphi negotiated agreements to transfer the 
Delphi hourly plan participants' pensions back into GM's hourly plan 
in two installments.[Footnote 76] The unions participated in 
developing the criteria to select the pensions to be transferred in 
the first installment, which took place in September 2[Footnote 
77]008. In this transfer, the pensions of about 24 percent (14,413 of 
60,905) of Delphi's hourly plan participants were transferred to GM's 
hourly plan, which assumed the associated $2.1 billion in net 
liabilities for these pensions.[Footnote 78] As a result, those Delphi 
plan participants whose pensions were transferred were no longer part 
of Delphi's plan and were therefore protected from any benefit loss 
resulting from Delphi's subsequent plan termination. 

Furthermore, top-up agreements covering certain hourly workers will 
protect these workers, but not others, from potential losses due to 
the benefit limits in ERISA. In June and August of 2007, GM agreed 
with UAW, IUE, and USWA to extend the top-up agreements originally 
negotiated in 1999 after Delphi's spinoff from GM. In November 2008, 
Delphi froze its hourly plan, ceasing the accrual of additional 
benefits under the plan and triggering the top-up agreement for 
covered participant[Footnote 79]s. GM negotiated and maintained the 
top-up agreements with the UAW during its bankruptcy and 
restructuring, as did new GM with the IUE and USWA in September 2009. 
As a result, certain covered hourly employees will receive their full 
promised benefits despite the plan freeze and subsequent termination, 
even if their benefits exceed the guaranteed benefit limits under 
ERISA. According to data provided by GM, about 60 percent of the 
participants in Delphi's hourly plan as of the date of plan 
termination are potentially covered by GM top-ups if there is any 
reductions in their promised benefits. As of June 2011, GM reported 
that it had paid $221.9 million to 12,638 Delphi retirees and 
dependents under these top-up agreements. 

As indicated in figure 4, however, most Delphi employees are not 
covered by these top-up agreements. No participants in Delphi's 
salaried plan or other four smaller plans are covered. In addition, 
about 40 percent of Delphi hourly plan participants are also not 
covered, including anyone who never was qualified because they were 
not members of the unions securing these agreements, were not members 
of the GM hourly plan prior to the spinoff, or lost their 
qualification because they had a break in their employment or 
otherwise lost their seniority. Participants who would otherwise be 
covered, but do not meet the retirement criteria of the plan, also 
will not be provided top-ups, according to GM officials[Footnote 80].: 

Figure 4: Number of Delphi Employees Covered by GM Top-Ups, by Plan: 

[Refer to PDF for image: horizontal bar graph] 

Covered: 
Delphi hourly plan: 28,501. 

Not covered: 
Delphi hourly plan: 18,675; 
Delphi salaried plan: 20,203; 
Four smaller plans: 2,229; 
Total: 41,107. 

Source: GAO analysis of PBGC and GM data. 

Note: Delphi hourly plan participants who were not protected by top-up 
agreements include all those who were not members affiliated with UAW, 
IUE, or USWA and were not previously employed by GM prior to the 
Delphi spin-off. 

[End of figure] 

PBGC will reduce the benefits of all participants in the terminated 
pension plans whose promised benefits exceed ERISA's guaranteed 
benefit limits. Because of the GM top-up, certain hourly plan 
participants will have any pension benefit reduced because of 
statutory limits paid to them by GM. The combination of the GM top-ups 
and the 2008 partial plan transfer of Delphi's hourly plan 
participants to GM have resulted in a much higher percentage of 
salaried plan participants ultimately facing benefit reductions than 
hourly plan participants. Based on the status of PBGC's benefit 
reviews as of June 2011, 18 percent of the salaried plan participants 
have had their benefits reduced, while only 1 percent of the hourly 
plan participants had reductions that will not be topped up by 
GM.[Footnote 81] (See figure 5.) However, the percentage of hourly 
participants with reductions not topped up by GM is expected to rise 
over time, as more of this group have their benefits reviewed by PBGC. 
According to PBGC officials, no other underfunded pension plan 
terminated and trusteed by PBGC has had a top-up agreement with a 
parent company comparable to these agreements between Delphi and GM. 

Figure 5: Status of Benefits for Participants from Delphi's Hourly and 
Salaried Plans (as of June 2011): 

[Refer to PDF for image: 2 pie-charts] 

Delphi hourly plan: 
Transferred to GM: 23%; 
Pending PBGC review: 31%; 
PBGC review and no benefit reduction: 24%; 
ERISA benefit reduction and GM top-up: 21%; 
ERISA benefit reduction and no GM top-up: 1%. 

Delphi salaried plan: 
Pending PBGC review: 59%; 
PBGC review and no benefit reduction: 23%; 
ERISA benefit reduction and no GM top-up: 18%. 

Source: GAO analysis of PBGC and GM data. 

[End of figure] 

Both Delphi and PBGC Provided Delphi Employees with Information: 

In the course of the Delphi bankruptcy and the termination of its 
pension plans, Delphi employees were notified by Delphi and 
subsequently by PBGC of certain facts, as required by law--namely, of 
Delphi's intention to defer pension plan contributions and to 
subsequently freeze the plans, and of PBGC's intention to terminate 
and trustee the plans, and subsequently the effects, when calculated, 
on individual employee pensions. Through their unions, hourly 
employees received additional information, while salaried employees 
had no formal representative through which to receive additional 
information until they formed DSRA. 

Delphi Notified Pension Holders as Required and also Communicated with 
Employee Representatives: 

Delphi notified both hourly and salaried employees in 2006 that it had 
failed to make the minimally-required contribution to their pension 
plans due at that time and that the plans were underfunded by $4.3 
billion as of December 2004.[Footnote 82] Later in 2006, it also 
notified its employees, as required, that the company had requested a 
funding waiver for plan year 2006 from the IRS.[Footnote 83] This 
notification also included legally required information such as a 
description of the extent to which the plan is funded. Similarly, in 
2007, Delphi notified the hourly employees of another waiver request 
to defer hourly plan contributions for plan year 2007. Subsequently, 
as required, in October 2008, Delphi notified representatives of the 
unions, UAW, IUE, and USWA, that the hourly plan would be frozen as of 
the end of November 2008 and that participants would, consequently, 
cease accruing additional pension benefits.[Footnote 84] In addition, 
as required, in August of 2008, Delphi also notified salaried 
employees that their plan would be frozen as of the end of September. 

Prior to the termination, Delphi employees did not receive regular 
information from Delphi as to the actual funding status of their 
plans. Under a new federal requirement, such reporting would have been 
first required of Delphi by January 1, 2010--several months after PBGC 
had terminated and trusteed the plans.[Footnote 85] However, Delphi 
noted that it provided its employees with summary plan descriptions, 
as required.[Footnote 86] The example summary plan descriptions we 
obtained for the salaried and hourly plans included information about 
PBGC's pension insurance program and how pension payments could be 
reduced if the plan terminates without enough money to pay all 
benefits, based on the guarantee limits in ERISA and PBGC regulations. 

PBGC Communicated with Delphi Employees: 

In a July 2009 PBGC press release, PBGC announced the Delphi employee 
pension plans were terminated and the underfunded status of the plans. 
Following termination, PBGC notified Delphi employees of its role as 
statutory trustee of the plans, as required by ERISA.[Footnote 87] 
Based on official Delphi notices to employees we reviewed, this press 
release from PBGC constituted the first time that employees were 
apprised of the fact that the plans were severely underfunded since 
the notice from Delphi in 2006. Following termination in July, PBGC 
sent Delphi employees letters notifying them that if they were 
eligible and applied to PBGC to begin payments, it would begin paying 
estimated benefits. It also has a toll-free telephone number that 
allows any participant to call PBGC directly with questions. PBGC sent 
Delphi employees a welcome packet and a video describing PBGC's role 
as trustee. The agency also spoke regularly with representatives of 
DSRA. PBGC met, as well, with union representatives of UAW, IUE, and 
USWA to answer their questions. 

As of October 2011, PBGC sent benefit determination letters, informing 
participants of their benefits, to about 10,600 hourly employees and 
to about 50 salaried employees. According to PBGC, letters to many 
salaried employees had been delayed due to coordination with several 
insurers contracted by Delphi to provide annuities. 

Delphi Employees also Received Information through Their Employee 
Representatives: 

As representatives of hourly employees in collective bargaining over 
wages and benefits, the three major unions with whom we spoke--UAW, 
IUE, and USWA--said that they kept their members apprised of changes 
to their benefits and prior agreements, through briefings, letters, 
and through the process of ratification. In addition, their members 
were apprised by GM in January 2010 that the company would honor the 
top-up agreements. On the other hand, Delphi's salaried employees had 
no such union membership or agreement with GM, and received their 
information exclusively from Delphi until just before termination in 
February 2009, when they formed DSRA. 

Concluding Observations: 

The termination of Delphi's pension plans culminated from a 
complicated and intertwined set of events involving Delphi, GM, 
various unions, and Treasury, as well as PBGC. That some participants 
will not get the full benefits promised to them by their employer is 
not unusual when companies go bankrupt and leave their plans with 
large unfunded liabilities. At the same time, the role that GM and 
Treasury played in the events leading up to termination caused the 
process to be unusual in several respects. Beginning with negotiations 
related to Delphi's spin-off in 1999, GM--although no longer the 
sponsor of the Delphi plans--agreed to top up the benefits of certain 
union workers should the Delphi hourly plan be frozen or terminated, 
and maintained these top-up agreements at various points over the next 
decade. In addition, after Delphi filed for bankruptcy, GM agreed to 
take back all or part of Delphi's hourly plan under certain 
conditions, and actually took back the pensions of nearly a fourth of 
Delphi hourly plan's participants in 2008. PBGC officials noted they 
have not seen these types of agreements in any other plan terminations 
to date. Then, with GM's own financial condition deteriorating, 
Treasury's role as a shareholder led some to question the role 
Treasury might also be playing with respect to GM's decisions 
regarding Delphi and its pension plans. As we have reported 
previously, Treasury's multiple roles in situations involving the auto 
industry and workers' pensions may create potential tensions and 
challenges. On behalf of the U.S. taxpayer, Treasury has an interest 
in safeguarding taxpayer investment, while also--through the Secretary 
of the Treasury's role on PBGC's board--protecting the financial 
viability of workers' pension plans. Although Treasury has established 
policies to separate these interests, and various parties told us that 
Treasury did not play an active role in decisions regarding Delphi's 
plans, potential tensions due to these multiple roles remain. In our 
prior work on the automakers' pension plans, we concluded that the 
best way for Treasury to mitigate these tensions is through more open 
reporting to Congress and the public on its activities. In response to 
a previous recommendation, Treasury implemented a revised reporting 
policy, attempting to balance concerns about publicly disclosing 
proprietary information in a competitive market with the need for 
greater transparency. We believe that the most effective means of 
addressing concerns about Treasury's different roles is for Treasury 
to continue to be as transparent as possible about its activities. 

Agency Comments and Our Evaluation: 

We obtained written comments on a draft of this report from the 
Department of the Treasury (see appendix IV). Treasury's comments 
generally agree with the findings and concluding observations in our 
report, emphasizing that Treasury did not authorize, approve, or 
consent to the termination of the Delphi salaried plan, and that PBGC 
independently decided - not the PBGC board or Treasury - to terminate 
the Delphi pensions. We continue to believe that Treasury's multiple 
roles in situations involving the auto industry and workers' pensions 
may create the appearance of potential tensions and challenges, and 
that the most effective means of addressing these concerns is for 
Treasury to continue to be as transparent as possible about its 
activities. 

In addition, Treasury, PBGC, and the Department of Labor, all provided 
technical comments that we incorporated as appropriate. We also 
provided certain segments of the draft to Delphi, GM, DSRA, UAW, IUE, 
and USWA. We received technical comments on these segments from GM and 
USWA, and have incorporated these where appropriate, as well. 

We are sending copies of this report to the appropriate congressional 
committees, the Director of PBGC, the Secretary of Labor, the 
Secretary of Treasury, the Secretary of Commerce, and other interested 
parties. The report also is available at no charge on GAO's Web site 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact Barbara Bovbjerg at (202) 512-7215 or bovbjergb@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. Key contributors 
to this report are listed in appendix V. 

Signed by: 

Barbara D. Bovbjerg: 
Managing Director Education, Workforce, and Income Security Issues: 

List of Requesters: 

The Honorable John A. Boehner:
Speaker of the House of Representatives: 

The Honorable Roger F. Wicker:
United States Senate: 

The Honorable Spencer T. Bachus:
Chairman, Committee on Financial Services:
House of Representatives: 

The Honorable Mike Pence:
The Honorable Michael R. Turner:
House of Representatives: 

[End of section] 

Appendix I: Single-Employer Firms with the Largest PBGC Claims for 
Terminated Plans (1975 through 2011): 

Top-10 firms: 

1. United Airlines; 
Number of plans: 4; 
Fiscal year(s) of plan: termination(s): 2005; 
Claims (by firm): $7,441,450,992; 
Vested participants: 123,957; 
Average claim per vested participant: $60,033; 
Percent of total claims: 16.3. 

2. Delphi; 
Number of plans: 6; 
Fiscal year(s) of plan: termination(s): 2009; 
Claims (by firm): 6,108,491,551; 
Vested participants: 69,042; 
Average claim per vested participant: 88,475; 
Percent of total claims: 13.4. 

3. Bethlehem Steel; 
Number of plans: 1; 
Fiscal year(s) of plan: termination(s): 2003; 
Claims (by firm): 3,654,380,116; 
Vested participants: 91,312; 
Average claim per vested participant: 40,021; 
Percent of total claims: 8.0. 

4. US Airways; 
Number of plans: 4; 
Fiscal year(s) of plan: termination(s): 2003, 2005; 
Claims (by firm): 2,751,534,173; 
Vested participants: 55,770; 
Average claim per vested participant: 49,337; 
Percent of total claims: 6.0. 

5. LTV Steel[A]; 
Number of plans: 6; 
Fiscal year(s) of plan: termination(s): 2002, 2003, 2004; 
Claims (by firm): 2,134,985,884; 
Vested participants: 83,094; 
Average claim per vested participant: 25,694; 
Percent of total claims: 4.7. 

6. Delta Air Lines; 
Number of plans: 1; 
Fiscal year(s) of plan: termination(s): 2006; 
Claims (by firm): 1,641,083,525; 
Vested participants: 13,291; 
Average claim per vested participant: 123,473; 
Percent of total claims: 3.6. 

7. National Steel; 
Number of plans: 7; 
Fiscal year(s) of plan: termination(s): 2003; 
Claims (by firm): 1,275,628,286; 
Vested participants: 33,737; 
Average claim per vested participant: 37,811; 
Percent of total claims: 2.8. 

8. Pan American Air; 
Number of plans: 3; 
Fiscal year(s) of plan: termination(s): 1991, 1992; 
Claims (by firm): 841,082,434; 
Vested participants: 31,999; 
Average claim per vested participant: 26,285; 
Percent of total claims: 1.8. 

9. Trans World Airlines; 
Number of plans: 2; 
Fiscal year(s) of plan: termination(s): 2001; 
Claims (by firm): 668,377,106; 
Vested participants: 32,263; 
Average claim per vested participant: 20,717; 
Percent of total claims: 1.5. 

10. Weirton Steel; 
Number of plans: 1; 
Fiscal year(s) of plan: termination(s): 2004; 
Claims (by firm): 640,480,970; 
Vested participants: 9,410; 
Average claim per vested participant: 68,064; 
Percent of total claims: 1.4. 

Top-10 total; 
Number of plans: 35; 
Claims (by firm): $27,157,495,038; 
Vested participants: 543,875; 
Average claim per vested participant: $49,933; 
Percent of total claims: 59.6. 

All other total; 
Number of plans: 4,257; 
Claims (by firm): $18,390,580,981; 
Vested participants: 935,125; 
Average claim per vested participant: $19,666; 
Percent of total claims: 40.4. 

Total; 
Number of plans: 4,292; 
Claims (by firm): $45,548,076,019; 
Vested participants: 1,479,000; 
Average claim per vested participant: $30,797; 
Percent of total claims: 100.0. 

Source: PBGC, Pension Insurance Data Book 2009 and 2011 PBGC Annual 
Report. 

Note: Cumulative plans include 10 multiemployer plans trusteed by PBGC 
before 1980. PBGC has not trusteed any multiemployer plans since 1980. 
The Multiemployer Pension Plan Amendments Act of 1980 changed PBGC's 
responsibility from trusteeship of troubled multiemployer plans to 
providing financial assistance (loans) to insolvent plans. Pub. L. No. 
96-364, 94 Stat. 1208. 

[A] Does not include 1986 termination of a Republic Steel plan 
sponsored by LTV. 

[End of table] 

[End of section] 

Appendix II: Number and Percentage Delphi Retirees with Reductions in 
ERISA Benefits Due to Guaranteed Benefit Limits (as of June 1, 2011): 

Plan: Delphi Hourly Plan[F]; 
Total number of participants (as of termination): [Empty]; 
Number of participants reviewed by PBGC as of June 2011: [Empty]; 
Number with reduction(s) in PBGC estimated benefit[A]: [Empty]; 
Percentage reviewed with reduction[B]: [Empty]; 
Accrued-at-normal limit[C]: 
Number: 11,619; 
Percentage reduced: 41.42; 
Maximum limit[D]: 
Number: 472; 
Percentage reduced: 1.68; 
Phase-in limit[E]: 
Number: 352; 
Percentage reduced: 1.25. 

Plan: Delphi Salaried Plan; 
Total number of participants (as of termination): 20,203; 
Number of participants reviewed by PBGC as of June 2011: 8,273; 
Number with reduction(s) in PBGC estimated benefit[A]: 3,714; 
Percentage reviewed with reduction[B]: 45; 
Accrued-at-normal limit[C]: 
Number: 2,323; 
Percentage reduced: 28.08; 
Maximum limit[D]: 
Number: 2,174; 
Percentage reduced: 26.28; 
Phase-in limit[E]: 
Number: 0; 
Percentage reduced: 0. 

Plan: Packard-Hughes Interconnect Non-Bargaining Retirement Plan 
(PHI_NBU); 
Total number of participants (as of termination): 1,383; 
Number of participants reviewed by PBGC as of June 2011: 240; 
Number with reduction(s) in PBGC estimated benefit[A]: 30; 
Percentage reviewed with reduction[B]: 13; 
Accrued-at-normal limit[C]: 
Number: 3; 
Percentage reduced: 10.00; 
Maximum limit[D]: 
Number: 1; 
Percentage reduced: 3.33; 
Phase-in limit[E]: 
Number: 26; 
Percentage reduced: 86.67. 

Plan: Packard-Hughes Interconnect Bargaining Retirement Plan (PHI_BU); 
Total number of participants (as of termination): 165; 
Number of participants reviewed by PBGC as of June 2011: 80; 
Number with reduction(s) in PBGC estimated benefit[A]: 62; 
Percentage reviewed with reduction[B]: 78; 
Accrued-at-normal limit[C]: 
Number: 0; 
Percentage reduced: 0; 
Maximum limit[D]: 
Number: 1; 
Percentage reduced: 1.61; 
Phase-in limit[E]: 
Number: 61; 
Percentage reduced: 98.39. 

Plan: ASEC Manufacturing Retirement Program (ASEC); 
Total number of participants (as of termination): 533; 
Number of participants reviewed by PBGC as of June 2011: 126; 
Number with reduction(s) in PBGC estimated benefit[A]: 6; 
Percentage reviewed with reduction[B]: 5; 
Accrued-at-normal limit[C]: 
Number: 0; 
Percentage reduced: 0; 
Maximum limit[D]: 
Number: 4; 
Percentage reduced: 66.67; 
Phase-in limit[E]: 
Number: 0; 
Percentage reduced: 0. 

Plan: Delphi Mechatronic Systems Retirement Program (DMS); 
Total number of participants (as of termination): 148; 
Number of participants reviewed by PBGC as of June 2011: 12; 
Number with reduction(s) in PBGC estimated benefit[A]: 3; 
Percentage reviewed with reduction[B]: 25; 
Accrued-at-normal limit[C]: 
Number: 3; 
Percentage reduced: 100.00; 
Maximum limit[D]: 
Number: 1; 
Percentage reduced: 33.33; 
Phase-in limit[E]: 
Number: 0; 
Percentage reduced: 0. 

Source: GAO analysis of PBGC data. 

[A] Retirees may have more than one type of reduction; therefore, the 
number of retirees with reductions and the number of reductions may 
not be the same for each plan. 

[B] These rates are subject to change as more workers retire and 
receive early estimated reductions and final benefit determination 
letters from PBGC over the next year or more. 

[C] Accrued-at-normal limit: The monthly guaranteed benefit cannot be 
greater than the monthly benefit provided as a straight-life annuity 
(that is, a periodic payment for the life of the retiree, with no 
additional payments to survivors) available at the plan's normal 
retirement age. The portion of any combined early retirement benefit 
and supplemental benefit that exceeds the normal retirement age 
straight life annuity is not guaranteed under this provision. 29 
C.F.R. § 4022.21 (2011). 

[D] Maximum limit: The guaranteed benefit cannot exceed the statutory 
maximum, adjusted annually, at the time the plan terminates. In 2009, 
the maximum was $54,000 per year for a person who begins to receive 
benefits from PBGC at age 65 and with no survivor benefit (that is, a 
single-life annuity). The maximum is lower for those retiring under 
age 65 or with a survivor benefit. 29 U.S.C. § 1322(b)(3); 29 C.F.R. § 
4022.23 (2011). 

[E] Phase-in limit: The guaranteed benefit cannot include any benefit 
increase that was made within 1 year of the date of the plan 
termination. For benefit improvements that became effective more than 
1 year but less than 5 years prior to the plan's termination, the 
guaranteed amount is the larger of 20 percent of the benefit increase 
or $20 per month of the increase for each full year the increase was 
in effect. 29 U.S.C. § 1322(b)(1) and (7); 29 C.F.R. § 4022.25 (2011). 

[F] PBGC also found that 1,567 hourly retirees should have their 
benefits reduced because it determined that they were not eligible for 
the "mutually satisfactory retirement," which is a type of early 
retirement under the Hourly Plan. 

[G] As of June 2011, PBGC still had about 2,000 of the 30,000 Hourly 
Plan retirees awaiting review. 

[End of table] 

[End of section] 

Appendix III: Allocation of Plan Assets and Recoveries to Unfunded 
Nonguaranteed Benefits: 

Upon the termination of a single-employer plan, plan assets are 
identified, valued, and then allocated to participant benefits, in 
accordance with the requirement of section 4044 of ERISA. Codified at 
29 U.S.C. § 1344. In addition to plan assets, a portion of monies from 
company assets that PBGC recovers for unfunded benefit liabilities are 
allocated to participant benefits, in accordance with section 4022(c) 
of ERISA.29 U.S.C. § 1322(c). 

Plan assets available to pay for benefits under the plan are allocated 
to participant benefits according to six priority categories, as 
described in table 4. Assets are allocated to each priority category 
in succession, beginning with priority category 1. If the plan has 
sufficient assets to pay for all benefits in a priority category, the 
remaining assets are allocated to the next lower priority category. 
This process is repeated until all benefits in priority categories 1 
through 6 have been provided or until all available plan assets have 
been allocated. Most private sector defined benefit plans do not 
require or allow participant contributions, so there are rarely any 
benefits in priority categories 1 and 2. Thus, in most trusteed plans, 
asset allocation begins with the benefits in priority category 3, that 
is, the benefits of those retired or eligible to retire 3 years before 
the plan terminated. However, it should be noted that assets are 
allocated based on retirement eligibility, not retirement status, and 
that many participants have benefits in more than one category. Table 
5 provides the allocation of plan assets and recoveries to priority 
categories among plans that had 5,000 or more participants for the 10 
firms with the largest claims. 

Table 4: Allocation Priority Categories (PC): 

Priority Category: PC-1; 
Definition: Accrued benefits derived from voluntary employee 
contributions. (According to PBGC, such benefits are "extremely rare" 
among private sector defined benefit plans.) 

Priority Category: PC-2; 
Definition: Accrued benefits derived from mandatory employee 
contributions. (According to PBGC, such benefits are "quite uncommon" 
among private sector defined benefit plans.) 

Priority Category: PC-3; 
Definition: Annuity benefits that have been in pay status for at least 
3 years before the plan's termination date, or could have been in pay 
status for at least 3 years before the plan's termination date had the 
participant chosen to retire at his or her earliest possible 
retirement date; however, benefits subject to the phase-in limitation 
(that is, benefit increases made within the last 5 years) are 
excluded. These benefits can be either guaranteed or nonguaranteed. 

Priority Category: PC-4; 
Definition: Other guaranteed benefits and certain nonguaranteed 
benefits. The nonguaranteed benefits are those that are subject to the 
aggregate benefits limitation for participants in more than one plan 
that has been terminated with insufficient funds or are subject to 
special provisions applicable to substantial owners (that is, those 
owning more than 10 percent of the company). 

Priority Category: PC-5; 
Definition: Other vested nonguaranteed benefits that a participant is 
entitled to under the plan; however, benefits that result solely due 
to the termination of the plan--which are deemed "forfeitable"--are 
excluded. 

Priority Category: PC-6; 
Definition: All other benefits under the plan. This category includes 
nonvested benefits and "grow-in" benefits, which are benefits that are 
provided in some situations where the company continues to operate 
after the plan is terminated. 

Source: PBGC. 

[End of table] 

Table 5: Comparison of Allocation of Plan Assets and Recoveries among 
Plans of Firms with 10 Largest Claims: 

Firm/plans[A]: United Airlines; Ground Employees plan; 
Present value[B] (millions of dollars): 
Plan assets: $1,309; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $1,978; 
Unfunded non-guaranteed benefits: $796; 
Total[D]: $2,774; 
Recovery ratio (percent)[E]: 12.88; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 97; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries:
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 13; 
PC6: 0. 

Firm/plans[A]: United Airlines; Management, administrative and public 
contact plan; 
Present value[B] (millions of dollars): 
Plan assets: $1,651; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $1,644; 
Unfunded non-guaranteed benefits: $670; 
Total[D]: $2,313; 
Recovery ratio (percent)[E]: 12.75; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 100; 
PC4[G]: 1; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: Not applicable[H]; 
PC4[G]: 100; 
PC5: 37; 
PC6: 0. 

Firm/plans[A]: United Airlines; Flight attendant plan; 
Present value[B] (millions of dollars): 
Plan assets: $1,427; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $1,644; 
Unfunded non-guaranteed benefits: $256; 
Total[D]: $1,901; 
Recovery ratio (percent)[E]: 13.23; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 69; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 100; 
PC6: 9. 

Firm/plans[A]: United Airlines; Pilots plan; 
Present value[B] (millions of dollars): 
Plan assets: $2,846; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $1,376; 
Unfunded non-guaranteed benefits: $1,381; 
Total[D]: $2,757; 
Recovery ratio (percent)[E]: 12.98; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 81; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 56; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: Delphi (based on early estimates, calculations not yet 
finalized); Hourly plan; 
Present value[B] (millions of dollars): 
Plan assets: $3,700; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $4,000; 
Unfunded non-guaranteed benefits: $400; 
Total[D]: $4,400; 
Recovery ratio (percent)[E]: 6.3; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: (allocations not yet 
determined); 
Percent of liabilities funded by assets: (allocations not yet 
determined). 

Firm/plans[A]: Delphi (based on early estimates, calculations not yet 
finalized); Salaried plan; 
Present value[B] (millions of dollars): Plan assets: United Airlines : 
$2,400; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $2,200; 
Unfunded non-guaranteed benefits: $400; 
Total[D]: $2,600; 
Recovery ratio (percent)[E]: 6.3; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: (allocations not yet 
determined); 
Percent of liabilities funded by assets: (allocations not yet 
determined). 

Firm/plans[A]: Delphi (based on early estimates, calculations not yet 
finalized); Bethlehem Steel plan; 
Present value[B] (millions of dollars): 
Plan assets: $3,533; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $3,693; 
Unfunded non-guaranteed benefits: $835; 
Total[D]: $4,529; 
Recovery ratio (percent)[E]: 1.11; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 60; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 5; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: US Airways; Plan for pilots; 
Present value[B] (millions of dollars): 
Plan assets: $1,193; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $552; 
Unfunded non-guaranteed benefits: $1,692; 
Total[D]: $2,244; 
Recovery ratio (percent)[E]: 0.00; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 0; 
PC6: 0; 
Allocations, by priority category[F]: 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: Not applicable[H]; 
PC4[G]: Not calculated; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: US Airways; Employees of IAM & AW[I]; 
Present value[B] (millions of dollars): 
Plan assets: $560; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $749; 
Unfunded non-guaranteed benefits: $24; 
Total[D]: $774; 
Recovery ratio (percent)[E]: 8.27; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 77; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of liabilities funded by assets: 
PC3: Not applicable[H]; 
PC4[G]: Not calculated: 100; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: US Airways; Flight attendants plan; 
Present value[B] (millions of dollars): 
Plan assets: $420; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $647; 
Unfunded non-guaranteed benefits: $36; 
Total[D]: $683; 
Recovery ratio (percent)[E]: 0.00; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 0; 
PC6: 0; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: Not applicable[H]: 100: 56: (allocations not yet determined): 
PC4[G]: Not calculated; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: US Airways; Certain employees plan; 
Present value[B] (millions of dollars): 
Plan assets: $895; 
Unfunded benefit liabilities: 
Unfunded guaranteed benefits[C]: $685; 
Unfunded non-guaranteed benefits: $16; 
Total[D]: $701; 
Recovery ratio (percent)[E]: 4.39; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 100; 
PC4[G]: 7; 
PC5: 0; 
PC6: 0; 
Allocations, by priority category[F]: 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: Not applicable[H]; 
PC4: Not calculated; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: LTV Steel; Hourly plan; 
Present value[B] (millions of dollars): 
Plan assets: $1,697; 
Unfunded benefit liabilities: $1,681; 
Unfunded non-guaranteed benefits: $672; 
Unfunded benefit liabilities: Total[D]: $2,353; 
Recovery ratio (percent)[E]: 1.97; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 66; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 1; 
PC6: 0. 

Firm/plans[A]: LTV Steel; Salary plan; 
Present value[B] (millions of dollars): 
Plan assets: $384; 
Unfunded benefit liabilities: $302; 
Unfunded non-guaranteed benefits: $66; 
Unfunded benefit liabilities: Total[D]: $367; 
Recovery ratio (percent)[E]: 2.12; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 65; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 0; 
PC6: N/A. 

Firm/plans[A]: Delta Airlines: Pilots plan; 
Present value[B] (millions of dollars): 
Plan assets: $1,985; 
Unfunded benefit liabilities: $799; 
Unfunded non-guaranteed benefits: $1,769; 
Unfunded benefit liabilities: Total[D]: $2,568; 
Recovery ratio (percent)[E]: 38.51; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 93; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 34; 
PC6: 0. 

Firm/plans[A]: National Steel; Hourly plan; 
Present value[B] (millions of dollars): 
Plan assets: $482; 
Unfunded benefit liabilities: $471; 
Unfunded non-guaranteed benefits: $149; 
Unfunded benefit liabilities: Total[D]: $620; 
Recovery ratio (percent)[E]: 0; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 77; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 0; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: National Steel; Weirton retirement program; 
Present value[B] (millions of dollars): 
Plan assets: $313; 
Unfunded benefit liabilities: $190; 
Unfunded non-guaranteed benefits: $1; 
Unfunded benefit liabilities: Total[D]: $192; 
Recovery ratio (percent)[E]: 7.86; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 73; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 0; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: National Steel; Corporation retirement program; 
Present value[B] (millions of dollars): 
Plan assets: $303; 
Unfunded benefit liabilities: $291; 
Unfunded non-guaranteed benefits: $73; 
Unfunded benefit liabilities: Total[D]: $364; 
Recovery ratio (percent)[E]: 0; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 69; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 0; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: Pan American World Airways; Cooperative retirement 
income plan; 
Present value[B] (millions of dollars): 
Plan assets: $301; 
Unfunded benefit liabilities: $703; 
Unfunded non-guaranteed benefits: $13; 
Unfunded benefit liabilities: Total[D]: $715; 
Recovery ratio (percent)[E]: 12.01; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 52; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 32; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Firm/plans[A]: Trans World Airlines; Plan for employees; 
Present value[B] (millions of dollars): 
Plan assets: $736; 
Unfunded benefit liabilities: $460; 
Unfunded non-guaranteed benefits: $4; 
Unfunded benefit liabilities: Total[D]: $464; 
Recovery ratio (percent)[E]: 4.94; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 100; 
PC4[G]: Not calculated; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: Not applicable[H]; 
PC4[G]: Not calculated; 
PC5: 25; 
PC6: 0. 

Firm/plans[A]: Weirton Steel; Retirement plan; 
Present value[B] (millions of dollars): 
Plan assets: $540; 
Unfunded benefit liabilities: $637; 
Unfunded non-guaranteed benefits: $205; 
Unfunded benefit liabilities: Total[D]: $842; 
Recovery ratio (percent)[E]: 0; 
Allocations, by priority category[F]: 
Percent of liabilities funded by assets: 
PC3: 71; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0; 
Percent of unfunded nonguaranteed benefits funded by recoveries: 
PC3: 0; 
PC4[G]: 0; 
PC5: 0; 
PC6: 0. 

Source: GAO analysis of PBGC data: 

[A] Of the 35 plans associated with the 10 largest claims, this table 
includes the 20 plans with 5,000 or more participants. Of the 15 
remaining plans (including the 4 smaller Delphi plans): (1) 5 plans 
had unfunded nonguaranteed benefits that exceeded $20 million and the 
participants' portion of recoveries should be allocated using each 
plan's actual recovery ratio, (2) 9 plans had unfunded nonguaranteed 
benefits of less than $20 million and the participants' portion of 
recoveries should be allocated using the Small Plan Average Recovery 
Ratio (SPARR), and (3) 1plan did not have information on allocation of 
recoveries. 

[B] The present value is the actuarial value of benefits calculated as 
of the date of plan termination. 

[C] The ERISA guaranteed benefits are equal to the plan assets and the 
unfunded guaranteed benefits. 

[D] The total unfunded benefit liabilities are equal to the unfunded 
guaranteed benefits and the unfunded nonguaranteed benefits. This 
total may be slightly higher or lower than the sum of these preceding 
columns due to rounding. 

[E] For plans with unfunded nonguaranteed benefits exceeding $20 
million, the recovery ratio is the actual recovered amount (under 
section 4022(c) of ERISA) divided by the unfunded nonguaranteed 
benefits. In other cases, the ratio is an average of PBGC's recoveries 
over a 5-year period. 

[F] In most cases, plans had no participants in either the PC1 or PC2 
categories, therefore, we did not include these categories in the 
table. However, four of our plans did have participants in these 
categories: the US Airways Flight attendants plan, the Weirton 
retirement program plan, the Trans World Airlines plan for its 
employees, and the National Steel corporation retirement program. All 
these plans had sufficient plan assets to cover 100 percent of the 
unfunded PC2 benefits. 

[G] The funded percentage was not calculated for the PC4 category in 
some plans. According to PBGC officials, this may have been because it 
was obvious that assets were insufficient so that calculating the 
funded status was unnecessary. 

[H] Not applicable because PC3 benefits were 100 percent funded by 
plan assets. 

[I] IAM & AW stands for the International Association of Machinists 
and Aerospace Workers. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of the Treasury: 

Department Of The Treasury: 
Assistant Secretary: 
Washington, D.C. 20220: 

December 8, 2011: 

Barbara D. Bovbjerg: 
Managing Director: 
Education, Workforce, and Income Security Issues: 
U.S. Government Accountability Office: 
441 G Street, N.W. 

Washington, D.C. 20548: 

RE: Response to GAO's Draft Report: "Delphi Pension Plans: GM 
Agreements with Unions Give Rise to Unique Differences in Participant 
Benefits" 

Dear Ms. Bovbjerg: 

I am writing in response to your draft report entitled, Delphi Pension 
Plans: GM Agreements with Unions Give Rise to Unique Differences in 
Participant Benefits," dated November 23, 2011. The Department of the 
Treasury ("Treasury") appreciates the Government Accountability 
Office's ("GAO") review of the events leading to the termination of 
Delphi's pension plans, GM's decision to assume pension benefit "top-
up" agreements with certain hourly pension plan participants, and 
Treasury's role in the process. This letter provides Treasury's 
official response to the GAO draft report. 

As you describe in the draft report, the events surrounding GM's 
decision to assume the top-up agreements stemmed from negotiations 
between GM, Delphi, and various unions that took place more than a 
decade ago, in the context of GM spinning off Delphi into a separate
company. As a result of those negotiations, certain participants in 
the Delphi hourly plan received pension benefit guarantees. As the 
draft report notes, at the time of the spin-off, in 1999, the Delphi 
hourly plan was underfunded, whereas the Delphi salaried plan was 
fully funded. 

The draft report concludes that GAO's work corroborates statements by 
Treasury, GM, and PBGC that "PBGC independently decided to terminate 
the Delphi plans" and that "consistent with its usual practice, 
Treasury did not play an active role" in PBGC's termination decisions. 
In addition, the draft report concludes that Treasury only "played an 
advisory role in GM's decisions regarding the Delphi pensions" 
including "the decision to honor existing top-up agreements with some 
unions." We agree — Treasury did not authorize, approve, or consent to 
the termination of the Delphi salaried plan. 

The draft report also raises the "potential or perceived tensions" 
between Treasury's "multiple roles", both as a member of the PBGC 
board and as a common stockholder in GM, and states that "the 
appearance of a possible conflict could still arise". However, the 
draft report recognizes that "Treasury has established policies 
designed to separate these interests". Specifically, the report finds 
that PBGC independently decided — not the PBGC board or Treasury — to 
terminate the Delphi pensions. The draft report also found that 
although the Secretary sits on the board of PBGC, the board sets broad 
policy, and is not involved in the PBGCs' day-to-day operations, 
including decisions about terminating a pension plan. Furthermore, the 
draft report notes that "in the management of its investment in new 
GM", Treasury's auto team does not communicate with PBGC. 

We recognize that the bankruptcy of Delphi has been extremely 
difficult and challenging for all its employees, and we are acutely 
aware of the significant hardships that the entire United States 
automobile industry has faced in recent years. We appreciate the 
opportunity to respond to your draft report. We look forward to 
continuing to work with you and your team as we move forward. 

Sincerely, 

Signed by: 

Timothy G. Massad: 
Assistant Secretary for Financial Stability: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Barbara D. Bovbjerg, (202) 512-7215, bovbjergb@gao.gov: 

Staff Acknowledgments: 

In addition, Margie K. Shields, Assistant Director; Mark M. Glickman, 
Analyst-in-Charge; James Bennett; Susan Bernstein; A. Nicole Clowers; 
Julie DeVault; Heather Krause; Edward Leslie; Kathy Leslie; Sheila 
McCoy; Edda Emmanuelli-Perez; Bryan Rogowski; Raymond Sendejas; and 
Craig Winslow made significant contributions to this report. 

[End of section] 

Related GAO Products: 

Delphi Corporation: Key Events Leading to Termination of the Delphi 
Defined Benefit Plans, [hyperlink, 
http://www.gao.gov/products/GAO-12-234T]. Washington, D.C.: Nov 14, 
2011. 

Key Events Leading to the Termination of the Delphi Defined Benefit 
Plans. [hyperlink, http://www.gao.gov/products/GAO-11-373R]. 
Washington, D.C.: March 30, 2011. 

Troubled Asset Relief Program: Automaker Pension Funding and Multiple 
Federal Roles Pose Challenges for the Future. [hyperlink, 
http://www.gao.gov/products/GAO-10-492]. Washington, D.C.: April 6, 
2010. 

Troubled Asset Relief Program: The U.S. Government Role as Shareholder 
in AIG, Citigroup, Chrysler, and General Motors and Preliminary Views 
on its Investment Management Activities. [hyperlink, 
http://www.gao.gov/products/GAO-10-325T]. Washington, D.C.: December 
16, 2009. 

Troubled Asset Relief Program: Continued Stewardship Needed as 
Treasury Develops Strategies for Monitoring and Divesting Financial 
Interests in Chrysler and GM. [hyperlink, 
http://www.gao.gov/products/GAO-10-151]. Washington, D.C.: November 2, 
2009. 

Pension Benefit Guaranty Corporation: More Strategic Approach Needed 
for Processing Complex Plans Prone to Delays and Overpayments. 
[hyperlink, http://www.gao.gov/products/GAO-09-716]. Washington, D.C.: 
August 17, 2009. 

Pension Benefit Guaranty Corporation: Financial Challenges Highlight 
Need for Improved Governance and Management. [hyperlink, 
http://www.gao.gov/products/GAO-09-702T]. Washington, D.C.: May 20, 
2009. 

Auto Industry: Summary of Government Efforts and Automakers' 
Restructuring to Date. [hyperlink, 
http://www.gao.gov/products/GAO-09-553]. Washington, D.C.: April 23, 
2009. 

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 
Transparency and Accountability Issues. [hyperlink, 
http://www.gao.gov/products/GAO-09-504]. Washington, D.C.: March 31, 
2009. 

Auto Industry: A Framework for Considering Federal Financial 
Assistance. [hyperlink, http://www.gao.gov/products/GAO-09-242T]. 
Washington, D.C.: December 4, 2008. 

Troubled Asset Relief Program: Additional Actions Needed to Better 
Ensure Integrity, Accountability, and Transparency. [hyperlink, 
http://www.gao.gov/products/GAO-09-161]. Washington, D.C.: December 2, 
2008. 

Pension Benefit Guaranty Corporation: Improvements Needed to Address 
Financial and Management Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-08-1162T]. Washington, D.C.: September 
24, 2008. 

Pension Benefit Guaranty Corporation Single-Employer Insurance 
Program: Long-Term Vulnerabilities Warrant "High Risk" Designation. 
[hyperlink, http://www.gao.gov/products/GAO-03-1050SP]. Washington, 
D.C.: July 23, 2003. 

[End of section] 

Footnotes: 

[1] A DB plan promises a benefit that is generally based on an 
employee's years of service and, often, compensation as well. The 
employer is generally responsible for funding all or most of the 
benefit, investing and managing plan assets, and bearing the 
investment risk. 

[2] GAO, Key Events Leading to the Termination of the Delphi Defined 
Benefit Plans, [hyperlink, http://www.gao.gov/products/GAO-11-373R] 
(Washington, D.C.: Mar. 30, 2011). 

[3] Delphi Salaried retirees are in litigation against PBGC regarding 
termination of Delphi's pension plans. Black v. PBGC, No. 2:09-cv-
13616 (Bankr. E.D. Mich. filed Nov. 5, 2009). In September 2011, the 
court dismissed the retirees' claims against Treasury and Treasury 
officials. Order Granting Defendant United States Department of the 
Treasury, Presidential Task Force on the Auto Industry, Timothy F. 
Geithner, Steven L. Rattner, and Ron. A. Bloom's Reviewed Motion to 
Dismiss, No. 09-13616 (E.D. Mich. Sept. 1, 2011). It is GAO policy to 
avoid taking a position or addressing claims that are currently in 
litigation. This review was structured to avoid influencing or 
interfering with the litigation and this report does not address the 
legal issues involved in the litigation. 

[4] The Special Inspector General for the Troubled Asset Relief 
Program (SIGTARP) is conducting an audit of Treasury's role in GM's 
decision to provide top-ups for certain hourly workers, including 
whether the Administration or Treasury pressured GM to provide 
additional funding for the hourly plan. SIGTARP has not announced when 
it expects to complete this audit. 

[5] See appendix I for a summary description of PBGC's 10 largest 
terminations. 

[6] PBGC Office of Inspector General Evaluation Report, PBGC's Plan 
Asset Audit of National Steel Pension Plans Was Seriously Flawed (OIG 
Eval-2011-10/PA-09-66-1, Washington, D.C.: Mar. 30, 2011); "Letter to 
Chairman Miller of The Committee on Education and Labor Regarding PBGC 
Termination of United Airlines Pension Plans" (LTR-2010-10, 
Washington, D.C.: Jul. 20, 2010); and PBGC Processing of Terminated 
United Airlines Pension Plans Was Seriously Deficient, (OIG, Eval-2012-
05/PA-10-72, Washington, D.C: Nov. 30, 2011). 

[7] For a more detailed treatment of this history, see GAO-11-373R. 

[8] Effective October 1, 2000, IUE merged with the Communications 
Workers of America to become the Industrial Division of CWA (IUE-CWA); 
for the purposes of this report, we continue to refer to this entity 
as the IUE. 

[9] The splinter unions include the International Association of 
Machinists and Aerospace Workers; International Brotherhood of 
Electrical Workers; Michigan Regional Council of Carpenters, Local 687 
and Interior Systems, Local 1045; International Brotherhood of 
Painters and Allied Trades of the United States and Canada, Sign & 
Display Union Local 59; International Brotherhood of Teamsters; 
International Brotherhood of Boilermakers; International Union of 
Operating Engineers; and United Catering Restaurant Bar & Hotel 
Workers. 

[10] The top-up agreements were originally set to expire in October 
2007. In June 2007, GM, Delphi, and UAW entered into a memorandum of 
understanding (MOU) extending the GM benefit guarantee for Delphi UAW 
workers, which would be enforceable if benefit accruals for future 
credited service in the Delphi hourly plan were frozen and if the plan 
were terminated. On August 5, 2007, GM and Delphi entered into a MOU 
with Delphi IUE, and on August 16, 2007, with Delphi USWA, providing 
the same top-up guarantee as the Delphi UAW MOU. 

[11] Failing entities choose to go through Chapter 11 of the 
Bankruptcy Code when they hope to reorganize and stay in business 
rather than liquidate and go out of business. 11 U.S.C. §§ 1101-1174. 

[12] In December 2008, Treasury established AIFP under the Troubled 
Asset Relief Program (TARP) to help stabilize the U.S. automotive 
industry and avoid disruptions that would pose systemic risk to the 
nation's economy. TARP was authorized under the Emergency Economic 
Stabilization Act of 2008 (EESA), Pub. L. No. 110-343 div. A, 122 
Stat. 3765 (codified as amended at 12 U.S.C. §§ 5201-5261). EESA 
originally authorized Treasury to purchase or guarantee up to $700 
billion in troubled assets. § 115(a), 122 Stat. 3780. The Public-
Private Investment Program Improvement and Oversight Act of 2009 
amended EESA to reduce the maximum allowable amount of outstanding 
troubled assets under EESA by almost $1.3 billion, from $700 billion 
to $698.741 billion. Pub. L. No. 111-22, § 402, § 402(f), 123 Stat. 
1656, 1658. EESA requires that the appropriate committees of Congress 
be notified in writing when the Secretary of the Treasury, after 
consultation with the Chairman of the Board of Governors of the 
Federal Reserve System, determines that it is necessary to purchase 
other financial instruments to promote financial market stability. § 
3(9)(B), 122 Stat. 3767 (codified at 12 U.S.C. § 5202(9)(B)). 

[13] Throughout this report, in cases where a distinction is 
important, we refer to the pre-bankruptcy entity as "old GM" and the 
new one that purchased its operating assets as "new GM." Prior to 
bankruptcy, old GM's legal name was General Motors Corporation. The 
legal name of the new entity created in July 2009 was General Motors 
Company. As of October 19, 2009, General Motors Company became General 
Motors LLC. 

[14] Pub. L. No. 93-406, 88 Stat. 829 (codified, as amended, at 29 
U.S.C. §§ 1001-1461). 

[15] At least one of the following criteria must be present in order 
for PBGC to approve a distress termination: (1) liquidation in 
bankruptcy (Chapter 7) or insolvency proceedings; (2) reorganization 
in bankruptcy (Chapter 11); (3) inability to pay debts while in 
business without terminating a plan; or (4) unreasonably, burdensome 
pension costs caused solely by a decline in workers covered by the 
plan. 29 U.S.C. § 1341(c)(2)(B). 

[16] 29 U.S.C. § 1342(a). 

[17] For more details on how these limits affected Delphi participant 
benefits, see appendix II. 

[18] For more information on PBGC benefit determination, see GAO, 
Pension Benefit Guaranty Corporation: More Strategic Approach Needed 
for Processing Complex Plans Prone to Delays and Overpayments (GAO-09-
716; Washington, D.C.: Aug. 2009). 

[19] 29 U.S.C. § 1305. 

[20] PBGC's net accumulated financial deficit equals the total 
liabilities of the single employer program and the financial 
assistance unlikely to be repaid from the multiemployer program, less 
total assets in both programs. 

[21] 29 U.S.C. § 1302(d) and (f) and 29 C.F.R. § 4002.3 (2011). 

[22] ERISA specifies that in carrying out PBGC's functions, PBGC is to 
be administered by its director. 29 U.S.C. § 1302(a). 

[23] GAO, Pension Benefit Guaranty Corporation Single-Employer 
Insurance Program: Long-Term Vulnerabilities Warrant 'High Risk' 
Designation, [hyperlink, http://www.gao.gov/products/GAO-03-1050SP] 
(Washington, D.C.: July 2003). 

[24] GAO, Pension Benefit Guaranty Corporation: Governance Structure 
Needs Improvements to Ensure Policy Direction and Oversight, 
[hyperlink, http://www.gao.gov/products/GAO-07-808] (Washington, D.C.: 
July 2007); GAO, Pension Benefit Guaranty Corporation: Need for 
Improved Oversight Persists, [hyperlink, 
http://www.gao.gov/products/GAO-08-1062] (Washington, D.C.: September 
2008). 

[25] The Internal Revenue Service (IRS), within Treasury, oversees the 
tax qualified status of pension plans. 26 U.S.C. § 401(a). 

[26] See GAO, Troubled Asset Relief Program: Automaker Pension Funding 
and Multiple Federal Roles Pose Challenges for the Future, [hyperlink, 
http://www.gao.gov/products/GAO-10-492], (Washington, D.C.: April 6, 
2010); GAO, Troubled Asset Relief Program: The U.S. Government Role as 
Shareholder in AIG, Citigroup, Chrysler, and General Motors and 
Preliminary Views on its Investment Management Activities, [hyperlink, 
http://www.gao.gov/products/GAO-10-325T] (Washington, D.C.: Dec. 16, 
2009); GAO, Troubled Asset Relief Program: Status of Efforts to 
Address Transparency and Accountability Issues, [hyperlink, 
http://www.gao.gov/products/GAO-09-296] (Washington, D.C.: Jan. 30, 
2009); and GAO, Troubled Asset Relief Program: Additional Actions 
Needed to Better Ensure Accountability, Integrity, and Transparency, 
[hyperlink, http://www.gao.gov/products/GAO-09-161] (Washington, D.C.: 
Dec. 2, 2008). 

[27] For more on this topic, see [hyperlink, 
http://www.gao.gov/products/GAO-10-492], pp. 42-45. 

[28] GAO, Troubled Asset Relief Program: Continued Stewardship Needed 
as Treasury Develops Strategies for Monitoring and Divesting Financial 
Interests in Chrysler and GM, [hyperlink, 
http://www.gao.gov/products/GAO-10-151] (Washington, D.C.: Nov. 2, 
2009). Specifically, we recommended that Treasury report to Congress 
on how it planned to assess and monitor GM's and Chrysler's 
performance to help ensure the companies are on track to repay their 
loans and to return to profitability. 

[29] [hyperlink, http://www.gao.gov/products/GAO-10-492]. 

[30] Because of Treasury's concerns about disclosing proprietary 
information in a competitive market, Treasury responded to our 
recommendation by providing GAO, as a congressional oversight body, 
with information on how it was using sensitive business information to 
oversee the companies' performance. This approach was consistent with 
our recommendation that noted the need for transparency to be balanced 
with protecting certain propriety information. 

[31] Deposition of Matthew Feldman, Black v. PBGC, No. 04-44481 (RDD) 
(S.D. N.Y. July 21, 2009). 

[32] Under ERISA, PBGC has authority to involuntarily terminate a plan 
that fails to meet minimum funding standards, will be unable to pay 
benefits due, failed to make quarterly contributions, or is reasonably 
expected to increase long term losses to PBGC if not terminated. 29 
U.S.C. § 1342(a). 

[33] Delphi also agreed that the reorganized Delphi would provide GM 
with up to a $2.055 billion administrative claim. 

[34] Different estimates, done on different dates and using different 
methodologies intended for different purposes, measured varying 
degrees of funding in Delphi's salaried plan. According to Delphi, the 
salaried plan was 53.7 percent funded as of year-end 2008 and was 
still 53.7 percent funded as of the date of plan termination on July 
31, 2009. DSRA, based on an actuarial evaluation by Watson Wyatt, 
reported the salaried plan was 85.6 percent funded as of October 1, 
2008. PBGC measured salaried plan funding at 48 percent as of 
termination on July 31, 2009. 

[35] According to data provided by Delphi, based on a fair market 
valuation of plan assets the Delphi salaried plan was 108.8 percent 
funded as of year-end 1998 and 122.7 percent funded as of year-end 
1999. ("Fully funded" means that as of a particular date, plan assets 
equal or exceed the relevant measure of plan obligations.) However, 
for the typical pension plan invested in a mix of stocks and bonds, 
measures of funded status can be highly volatile, so that a plan that 
is fully funded on one date could be substantially less than fully 
funded on a subsequent date. 

[36] According to the deposition, Treasury was not focused on the 
other unions' plans at this time but was concerned about UAW because 
of UAW's role for new GM. According to data from Delphi, the hourly 
plan was 69.1 percent funded as of year-end 1999, measuring assets on 
a fair market value basis. 

[37] The assessment added that the since the first transfer in 
September 2008, the unfunded liability for the remainder of Delphi's 
hourly plan had increased from $1.5 billion to approximately $3.2 to 
3.5 billion as of March 31, 2009 

[38] Upon termination in July 2009, PBGC calculated that the hourly 
plan underfunding totaled $4.4 billion. 

[39] Mot. Def. U.S. Dep't Treas,., Pres. Task Force on Auto Indus., 
Timothy F. Geithner, Steven L. Rattner, Ron. A. Bloom, Dis., or Alt. 
Summ. J. at 24, Black v. PBGC, No. 2:09-cv-13616-AJT-DAS (E.D. Mich. 
Feb. 16, 2010). 

[40] 29 U.S.C. § 1302(d) and (f). 

[41] [hyperlink, http://www.gao.gov/products/GAO-10-492]. 

[42] The Federal Bailout of AIG: Hearing before the House Committee on 
Oversight and Government Reform, 111TH Cong. (2010) (answers to 
questions for the record from Timothy Geithner, Secretary of the 
Treasury). 

[43] In re General Motors Corp, 407 B.R. 463, 481 (Bankr. S.D.N.Y. 
2009) (Decision on debtor's motion for approval of (1) sale of assets 
to Vehicle Acquisitions Holdings LLC; (2) assumption and assignment of 
related executory contracts; and (3) entry into UAW retiree settlement 
agreement). The master sale and purchase agreement outlined, among 
other things, the assets being sold by old GM to new GM and the 
liabilities being assumed by new GM from old GM. 

[44] According to a July 2009 declaration of a GM official, since the 
spin-off from GM, Delphi was GM's largest component parts supplier, 
accounting for approximately 11.3 percent of GM's North American 
purchases and 9.6 percent of GM's global purchases in 2008. 
Declaration of Randall L. Pappal in Support of Debtors' Motion for 
Entry of Order Approving (I) Master Disposition Agreement for Purchase 
of Certain assets of Delphi Corp., (II) Related agreements, (III) 
Assumption and Assignment of Executory Contracts, (IV) Agreement with 
PBGC, and (V) Entry into Alternative Transaction in Lieu Thereof, at 
4, In re General Motors Corp., No. 09-50026 (Bankr. S.D.N.Y. July 8, 
2009). 

[45] Declaration of Randall L. Pappal in Support of Debtors' Motion 
for Entry of Order Approving (I) Master Disposition Agreement for 
Purchase of Certain assets of Delphi Corp., (II) Related agreements, 
(III) Assumption and Assignment of Executory Contracts, (IV) Agreement 
with PBGC, and (V) Entry into Alternative Transaction in Lieu Thereof 
at 4, In re General Motors Corp., No.09-50026 (Bankr. S.D.N.Y. July 8, 
2009). The declaration stated that Delphi was a sole-source, just-in-
time supplier of many critical parts to GM, including parts that are 
used in almost every GM product line in North America and identified 
several ways that a cessation of parts delivery by Delphi could affect 
GM, including that (1) most parts that Delphi manufactures for GM are 
not readily available from an alternate source, and while GM could 
accelerate efforts to resource Delphi parts in the event of a supply 
interruption, the sheer magnitude of the parts to be resourced and 
revalidation required would take at least several months to achieve; 
(2) because GM operates on a just-in-time inventory delivery system, 
GM plants relying on just-in-time shipments may run out of inventory 
of such parts and have to shut down within a matter of days, if Delphi 
ever ceased shipping even a small fraction of production parts to GM; 
and (3) the shutdown of GM plants as a result of termination of 
deliveries of affected parts from Delphi could idle tens of thousands 
of GM workers, significantly decrease GM's revenues, and increase GM's 
costs to expedite resourcing efforts. 

[46] Deposition of Treasury Official, No. 04-44481 (RDD) (S.D. N.Y. 
July 21, 2009). 

[47] Mot. Def. U.S. Dep't Treas. at 28. 

[49] 29 U.S.C. § 1344. 

[49] See 29 C.F.R. pt. 4044 (2011). 

[50] The controlled group consists of the plan sponsor and other 
entities under common control, determined generally as prescribed 
under 26 U.S.C. § 1563(a), 29 U.S.C. § 1301(a)(14), and 26 C.F.R. § 
1.414(b)-1 (2011). 

[51] Joint and several liability is when a creditor may sue one or 
more of the parties separately, or sue all of them. 

[52] 29 U.S.C. §1307(c). 

[53] 29 U.S.C. § 1362(a). 

[54] 29 U.S.C. §§ 1082 and 1083. 

[55] 29 U.S.C. § 1082(b)(1) and (2). 

[56] A lien is perfected by filing it as prescribed in the relevant 
jurisdiction. Perfecting a lien provides constructive notice of its 
existence to all third parties and gives it priority over any later-
perfected liens. In a bankruptcy, a properly perfected lien becomes a 
secured claim; an unperfected lien is treated the same as a general 
unsecured claims. All creditors with secured claims must receive 
payment in full (or up to the total value of their security) before 
those with general unsecured claims receive any payment at all. 

[57] 29 U.S.C. § 1083(k). 

[58] The Internal Revenue Code requires single employer plan sponsors 
to make a certain amount of periodic contributions to their DB plans 
and maintain minimum funding standards. 26 U.S.C. § 412. 

[59] Filing for bankruptcy operates as an automatic stay barring 
anyone from, among other things, perfecting or enforcing liens against 
the filing party. 11 U.S.C. § 362(a)(4). 

[60] 29 U.S.C. § 1368. 

[61] Deposition of Treasury Official, No. 04-44481 (RDD) (S.D. N.Y. 
July 21, 2009). 

[62] Of the $30.1 billion that Treasury provided to GM at its 
bankruptcy filing, $16.4 billion was held in escrow to be accessed by 
GM on an as-needed basis with the consent of Treasury. In October 
2009, Treasury approved GM's request for approximately $3 billion from 
this account for transactions related to the resolution of the Delphi 
bankruptcy. According to GM, this amount included the $70 million 
payment that GM made as part of its agreement with PBGC. 

[63] 29 U.S.C. § 1362(b)(1). 

[64] The companies we reviewed, 5 airlines and 4 steel companies and 
Delphi, are single-employer pension plan firms with the 10 highest 
claims on PBGC from 1975 through 2010. Among them they sponsored a 
total of 35 DB plans. See appendix III for a summary of PBGC 
recoveries for terminated plans of these firms. In addition to these 
terminations we also reviewed the terminations of the Collins & Aikman 
Corporation and Hayes Lemmerz International, Inc., because as it did 
in Delphi's case, PBGC filed liens on foreign subsidiaries of those 
companies. 

[65] One of the companies on the top-10 list, Delta Airlines, did have 
foreign subsidiaries in its controlled group and not in bankruptcy, 
but according to PBGC officials, these subsidiaries were relatively 
small and could not provide PBGC substantial recoveries. Therefore, 
PBGC did not file foreign liens in that case. 

[66] As others have noted, PBGC's authority to recover on liens abroad 
is not without some constraints. Allan E. Reznick and A. Owen Glist, 
Pension Benefit Guaranty Corp.--Controlled Group Claims Abroad, 235 
N.Y. L.J. No. 33 (2006). 

[67] 29 U.S.C. §§ 1322(c) and 1344(f). 

[68] 29 U.S.C. § 1344(f)(2)(C). For plans with less than $20 million 
in unfunded benefit liabilities, the split between PBGC and 
participant benefits is determined by PBGC's small plan recovery 
ratio, an average of PBGC's recoveries over a 5-year period (29 U.S.C. 
1344(f)(2)(A)). In 2009, this ratio was set at 3.85 percent. 

[69] When PBGC becomes trustee of a terminated plan, it pays 
participants already retired and receiving pension payments estimated 
benefits until it can determine the correct benefits participants 
should receive under ERISA. 

[70] The proportion of Delphi retirees who have had their benefits 
reduced by each of ERISA's benefit limits as of June 2011 is provided 
in appendix II. 

[71] Under ERISA, the accrued-at-normal limit permits little if any 
early retirement or supplemental benefits to be paid. It provides for 
benefits to be paid at the plan's normal retirement age, which is 65 
years old, as a straight-life annuity (that is, a periodic payment for 
the life of the retiree, with no additional payments to survivors). 29 
C.F.R. § 4022.21 (2011). 

[72] ERISA's maximum limit guarantees payment of benefits up to a 
federal statutory maximum (29 U.S.C. § 1322(b)(3)), adjusted annually, 
based on the year the plan terminates. 29 C.F.R. § 4022.23 (2011). 
When Delphi's plans terminated in 2009, the maximum limit was $54,000 
per year for a person retiring at age 65 and with no survivor benefit. 
The maximum is actuarially lower for those retiring under age 65 or 
with a survivor benefit. 

[73] For terminated underfunded plans, ERISA establishes a detailed 
process for allocating plan assets and PBGC recoveries to 
participants' benefits based on six priority categories. For further 
details, see appendix III. As discussed in the prior section, the 
recoveries allocated to participants for unfunded and nonguaranteed 
benefits do not include any of the recoveries for "due and unpaid 
employer contributions," which are allocated back to the pension plans 
to which they were owed and allocated with plan assets rather than 
recoveries. 

[74] We could not verify the accuracy of information collected by DSRA 
nor could we perform any statistical analyses to determine the 
significance of the results. 

[75] For a summary and timeline of events surrounding the creation of 
the union agreements and the termination of Delphi plans, see GAO-11-
373R. 

[76] On September 6, 2007, GM and Delphi signed the first Global 
Settlement Agreement that laid out their plans to transfer pensions 
from Delphi's hourly plan to GM's hourly plan. The plans for the 
second pension transfer are included in Section 2.03 of the Global 
Settlement Agreement between Delphi and GM, dated September 12, 2008. 

[77] The criteria and order of Delphi hourly pensions to be 
transferred was based on 2007 negotiations between the Unions, Delphi, 
and GM and contained in paragraph 22(b) of the Term Sheet (Attachment 
B) to the UAW-Delphi-GM Memorandum of Understanding - Delphi 
Restructuring, dated June 22, 2007 (and comparable agreements for the 
IUE-CWA and USWA). The UAW-Delphi-GM Implementation Agreement, dated 
September 26, 2008 (and comparable agreements for the IUE-CWA and 
USWA), supplemented this information to include additional criteria. 

[78] The second installment never took place because Delphi could not 
meet the agreed upon conditions for the transfer. For more information 
about the Delphi reorganization efforts, see GAO-11-373R. 

[79] In September 2008, Delphi also froze its salaried plan and three 
smaller qualified DB plans to limit all future benefit accruals. For 
more information on types of freezes and their effects, see: GAO, 
Defined Benefit Pensions: Plan Freezes Affect Millions of Participants 
and May Pose Retirement Income Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-08-817] (Washington, D.C.: Jul. 21, 
2008). 

[80] Pension plans include retirement eligibility criteria that must 
be met to receive normal or early retirement benefits. For instance, a 
Delphi hourly plan participant must generally be of certain age and 
have sufficient number of credited years of service to retire. For 
example, to get a normal retirement, a participant needs to be 65 
years old. To get an early retirement, a participant generally needs 
to be at least 60 years old with 10 years of service, have 30 years of 
credited service, or meet the rule-of-85 (i.e., be at least 55 years 
of age, but not age 60, and have the total of his an age and years of 
credited service total at least 85). 

[81] The 18 percent of salaried plan participants with benefit 
reductions and no top-ups represent 45 percent of the retirees with 
reductions. The 1 percent of hourly plan participants with reductions 
and no top-ups represent 5 percent of the hourly retirees reviewed by 
PBGC with reductions. 

[82] ERISA requires plan sponsors to notify employees when the sponsor 
requests a waiver from annual plan funding from the IRS (29 U.S.C. § 
1082(c)(6)); and to notify employees and unions if the sponsor freezes 
the plan (29 U.S.C. § 1054(h)). 

[83] The Delphi hourly and salaried plan year was from the beginning 
of October to the end of September of the following calendar year. 

[84] The splinter unions, IBEW, IAM, and IUOE were also notified in 
October 2008 that their members' benefits would be frozen as of the 
end of November 2008. 

[85] Pension Protection Act of 2006, Pub. L. No. 109-280, § 501(a), 
120 Stat. 780, 936-39. (codified at 29 U.S.C. § 1021(f)) and Employee 
Benefits Security Administration, Field Assistance Bulletin No. 2009-
01 at 2 (Feb. 10, 2009). 

[86] 29 U.S.C. § 1022 and 29 C.F.R. § 2520.102-3(m)(1)-(3) (2011). 

[87] 29 U.S.C. § 1342(d)(2). 

[End of section] 

GAO’s Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the 
performance and accountability of the federal government for the 
American people. GAO examines the use of public funds; evaluates 
federal programs and policies; and provides analyses, recommendations, 
and other assistance to help Congress make informed oversight, policy, 
and funding decisions. GAO’s commitment to good government is 
reflected in its core values of accountability, integrity, and 
reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO’s website [hyperlink, http://www.gao.gov]. Each 
weekday afternoon, GAO posts on its website newly released reports, 
testimony, and correspondence. To have GAO e mail you a list of newly 
posted products, go to [hyperlink, http://www.gao.gov] and select “E-
mail Updates.” 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of 
production and distribution and depends on the number of pages in the 
publication and whether the publication is printed in color or black 
and white. Pricing and ordering information is posted on GAO’s 
website, [hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 
MasterCard, Visa, check, or money order. Call for additional 
information. 

Connect with GAO: 

Connect with GAO on facebook, flickr, twitter, and YouTube.
Subscribe to our RSS Feeds or E mail Updates. Listen to our Podcasts.
Visit GAO on the web at [hyperlink, http://www.gao.gov]. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 
Website: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]; 
E-mail: fraudnet@gao.gov; 
Automated answering system: (800) 424-5454 or (202) 512-7470. 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, DC 20548. 

Public Affairs: 
Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, DC 20548.