2nd UPDATE:Delphi Workers Say US Officials Violated Pension Law
October 29 2009 - 1:40PM
Dow Jones News
A representative for Delphi Corp. (DPH) salaried employees told
U.S. Senate lawmakers Thursday he believes government officials
violated federal pension law.
The charge stems from a deal the Pension Benefit Guaranty Corp.
reached with Delphi and the old General Motors during GM's
expedited bankruptcy. The deal of $70 million in cash from GM and a
$3 billion unsecured bankruptcy claim from Delphi relinquished
liens the PBGC placed on Delphi assets during Delphi's roughly
four-year bankruptcy stint.
In prepared testimony before the Senate Health, Education, Labor
and Pensions Committee hearing to address retirement security and
inadequacies Thursday, Bruce Gump of the Delphi Salaried Retiree
Association said it believes the U.S. Treasury Department and Auto
Task Force pressured the government pension insurer into this deal,
which possibly violated the Employee Retirement Income Security
Act, or ERISA.
"They took this action knowing that they would have to assume
billions of dollars in unfunded pension liabilities and drastically
reduce the pensions of Delphi retirees," Gump said in his
testimony. "These illegal actions cost the Delphi retirees, both
hourly and salaried, billions of dollars in lost pension
annuities."
The PBGC liens, valued at nearly $3.4 billion, were meant to
protect Delphi pension plans but instead led to Delphi being unable
to sell its U.S.-based manufacturing assets to GM. Delphi was also
unable to sell its remaining offshore business.
PBGC spokesman Jeffrey Speicher said the agency's legal staff
did the best it could under the circumstances in obtaining the
maximum value it could to help cover annuities the government
insurer would have to pay. Speicher said if at any point PBGC
attorneys thought their actions would violate federal law, "we
would not have done it."
Still, Gump said the pending business matters between GM and
Delphi should not have been settled at the expense of salaried
workers' retirement funds.
"The U.S. Treasury set the 'standard of fairness' in the GM and
Delphi bankruptcies when they provided funds for full pensions and
reduced health-care insurance for the unionized workers," he said,
adding, "The U.S. Treasury and the Auto Task Force have
discriminated against us."
The Senate panel plans to hear testimony on retirement security
and what additional pension funding measures lawmakers should
consider. U.S. businesses have been freezing defined benefit plans
and threatening to reduce work forces to help pay
higher-than-expected pension costs brought on by the economic
downturn.
Pension advocates and sponsors were among others who testified
at the hearing.
The hearing follows legislation introduced in the House of
Representatives on Tuesday by Reps. Earl Pomeroy (D., N.D.) and Pat
Tiberi (R., Ohio) that would provide additional relief to ease
pension plan sponsor's required minimum contributions.
The hearing also included testimony from Barbara Bovbjerg of the
Government Accountability Office. Bovbjerg testified about income
security issues, particularly regarding GAO's finding that workers
whose pensions are seized by the PBGC "must wait about three years
for PBGC to complete the benefit determination process and provide
their finalized benefit amounts."
Bovbjerg said "long delays and uncertainty over final benefit
amounts make it difficult for workers to plan for retirement."
She later added that PBGC must "develop a better strategy for
processing complex plans in order to reduce delays, minimize
overpayments, improve communication with participants, and make the
appeals process more accessible."
Nonetheless, the primary matter for Congress to address is what,
if any, pension funding relief measures should be provided to
businesses.
Lawmakers, however, have been focused on overhauling the
health-care system, a time-consuming effort that could prevent
pension legislation from being approved before year-end.
-By Darrell A. Hughes, Dow Jones Newswires; 202-862-9255;
darrell.hughes@dowjones.com