PBGC Takes Over Delphi Pension Plans

By Staff Report

Jul. 23, 2009

The Pension Benefit Guaranty Corp. is taking over the massively underfunded pension plans of financially troubled auto parts manufacturer Delphi Corp., a takeover that will cost the PBGC about $6.25 billion—its second-biggest loss ever.

The PBGC will take over six plans sponsored by Troy, Michigan-based Delphi, which is in bankruptcy.

The biggest plan, which is offered to Delphi hourly employees and has about 47,000 participants, has about $3.7 billion in assets and more than $8 billion in liabilities. The PBGC expects to assume about $4 billion of the plan’s nearly $4.4 billion shortfall.

The second-biggest plan, covering about 20,000 salaried employees and retirees, has $2.4 billion in assets and liabilities of about $5 billion. The PBGC estimates it will be liable for about $2.2 billion of the $2.6 billion shortfall.

In addition, the PBGC will be responsible for about $50 million in unfunded benefits in four small Delphi plans with about 2,000 participants.

The $6.25 billion loss to the PBGC is surpassed only by the agency’s 2005 takeover of four United Airlines pension plans, which cost the agency about $7.5 billion.

The PBGC estimates its takeover of Delphi’s plans will increase its deficit by about $3.5 billion. The agency had included the claim in its 2008 financial statements but at a much lower estimated amount.

Delphi said in a statement that it does not believe a termination by the PBGC of the hourly plan would violate Delphi’s existing collective bargaining agreements or prior bankruptcy court orders.

However, Delphi said it hasn’t yet agreed to a termination of the plan and “will not enter into an agreement with the PBGC to take over the plan unless the bankruptcy court finds that doing so is not a violation of Delphi’s collective bargaining agreements or a federal district court issues an order terminating the U.S. hourly plan.”

The PBGC earlier disclosed that its deficit hit a record $33.5 billion at the end of its fiscal 2009 first half on March 31, compared with $11.2 billion at the close of fiscal 2008.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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