Retirement Security:

Key Events Leading to the Termination of the Delphi Defined Benefit Plans

GAO-11-373R: Published: Mar 30, 2011. Publicly Released: Mar 30, 2011.

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The Delphi Corporation was a global supplier of mobile electronics and transportation systems that began as part of the General Motors Corporation (GM) and was spun off as an independent company in 1999. Following bankruptcy in 2005, Delphi's six qualified defined benefit (DB) plans were terminated and trusteed by the Pension Benefit Guaranty Corporation (PBGC) in July 2009. These terminations culminated from a complex series of events involving Delphi, GM, various unions, the U.S. Department of the Treasury (Treasury), as well as PBGC. Congress asked us to examine a range of issues related to PBGC's termination of Delphi's DB plans, such as the decision to terminate, the efforts to secure plan assets, the treatment of collective bargaining agreements, and Treasury's role throughout the process. As discussed with Congressional staff members in December 2010, this report includes a timeline of key events leading to the termination of Delphi's plans. The timeline focuses, in particular, on events related to the reasons for GM providing retirement benefit supplements to certain Delphi employees, but not to others, and Treasury's role in those events. We will compare PBGC's process for terminating Delphi's pension plans with its process for terminating other large, complex plans in a future report.

During the 1999 spin-off negotiations between GM and Delphi, three unions secured benefit guarantees for their members: International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW); the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO (IUE); and the United Steelworkers of America (USWA). The benefit guarantees included an agreement that GM would provide a retirement benefit supplement (referred to as "top-ups") to certain Delphi employees who were members of these unions should their pension plans be frozen or terminated and they were to suffer a resulting loss in pension benefits. No other Delphi employees had a similar agreement to receive a top-up, including salaried workers and hourly workers belonging to other unions. Over the course of events that followed, the agreements with these three unions were ultimately preserved through the resolution of the bankruptcies of both GM and Delphi. Because Delphi's pension plans were terminated with insufficient assets to pay all accrued benefits, and because PBGC must adhere to statutory limits on the benefits it guarantees, many Delphi employees will receive a reduced pension benefit from PBGC compared with the benefits promised by their DB plans. Those Delphi employees receiving the top-ups will have their reduced PBGC benefit supplemented by GM while others will not.

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