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Delphi salaried retirees sue to block pension takeover

Delphi salaried retirees sue to block pension takeover

David Shepardson / Detroit News Washington Bureau

Washington — A group of Delphi Corp. salaried retirees filed suit Monday against the Pension Benefit Guaranty Corp., the government’s pension insurer.

The 14-page suit, filed in U.S. District Court in Detroit, warns that many salaried retirees will lose a substantial portion of their pensions after the Troy-based auto suppliers terminated its hourly and salaried pension plans and turned them over to the PBGC.

Last month, Delphi signed over its pension plans to PBGC, which cleared the way for an immediate takeover of the plans by the government’s insurer.

The suit is on behalf of more than 15,000 salaried retirees and dependents. It says salaried retirees "stand to lose between 30 percent and 70 percent of their current pension benefits."

The suit claims PBGC failed to comply with federal law governing pension plan terminations.

"Delphi and its executives were being pressured by the federal government to terminate (its pension plans) as part of an orchestrated effort on the federal government’s part to restructure the auto industry as expediently and cheaply as possible," the suit said.

PBGC didn’t immediately respond to a request seeking comment.

On July 22, the PBGC filed six lawsuits in U.S. district courts across the country, seeking court permission to take over the pension plans covering 70,000 retirees and employees of the Troy-based auto supplier.

Delphi said on July 22 it would shift hourly and salaried pension plans to the agency in a move that will cost PBGC about $6.25 billion. The government-owned corporation’s takeover of Delphi’s plans is the second most costly in history, behind the termination of United Airlines pensions, said Vincent Snowbarger, the acting director of the PBGC.

General Motors Co. has vowed to make up the difference for its hourly Delphi retirees whose benefits will be reduced — a condition of its contract with hourly retirees.

It’s not yet clear how that will occur. It will not do the same for salaried retires.

Delphi’s salaried retirees lost their life insurance and health insurance benefits this year, a move that saves Delphi $70 million annually.

Delphi hopes to emerge from bankruptcy by the end of this month, but conceded it might not exit until sometime in October.

The PBGC said it will be at least six months before pension recipients find out how much less they will receive, but they should receive a "welcome" kit and video in the next several weeks.

It will pay pension benefits up to the limits set by law, but in some cases, especially for younger retirees, pensioners will get far less.

The PBGC does not insure pension benefits above the legal limits, nor health benefits or other types of employee benefits.

The PBGC is a private, government-owned corporation funded through premiums from businesses and funds from pensions it takes over. It doesn’t receive taxpayer money, but many in Congress think taxpayers eventually will have to bail out the PBGC, which has a $33.5 billion deficit.

In May, the PBGC said it was closely monitoring companies in the auto manufacturing and auto supply industries. According to its estimates, auto sector pensions are underfunded by about $77 billion, of which $42 billion would be guaranteed by PBGC.

On July 31, the PBGC took over plans covering more than 10,000 workers and retirees at Metaldyne Corp. It is in talks to assume the pension plan at bankrupt auto supplier Northville-based Hayes-Lemmerz International Inc.

But the PBGC said the prospects for the sector improved when General Motors Co. and Chrysler Group LLC exited bankruptcy protection without terminating their pension plans.

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