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1 [1] (July 22, 2022)

handle is hein.crs/govehzm0001 and id is 1 raw text is: * Congressional Research Service Informing the legislitive diebate since 1914 July 22, 2022 Benefit Reductions to Participants in Delphi Pension Plans Introduction Delphi Technologies is a parts and components supplier to auto makers that was spun off from General Motors (GM) in 1999. In May 2009, Delphi's pension plans were terminated and responsibility for the payment of plan participants' benefits was turned over to the Pension Benefit Guaranty Corporation (PBGC), which is a government-run corporation that insures benefits for workers in private-sector defined benefit (DB) pension plans. PBGC operates separate insurance programs for single-employer and multiemployer DB plans. Delphi sponsored six single-employer pension plans. Although most workers in pension plans that are taken over by PBGC receive all of their promised benefits, some workers may receive less than their full benefit. This is because PBGC may not pay an individual more than a statutory maximum benefit. Some participants in Delphi pension plans whose benefits were reduced by PBGC claimed that their pension plan was wrongly terminated and have sought relief via both judicial and legislative processes. Defined Benefit Pensions and PBGC DB pensions are employer-funded pension plans in which retirees are typically paid a monthly dollar amount in retirement. The benefit is calculated using a formula typically based on a combination of the number of years of service and salary. For example, a plan might offer a benefit of 1.5% multiplied by the number of years of an employee's service multiplied by the average of the employee's highest five years of salary. A worker who was employed for 30 years and averaged a salary of $50,000 for the final five years of employment would receive a benefit of $22,500 per year or $1,875 per month. Employers are responsible for ensuring that there is sufficient funding for their DB pension plans to pay for current and future benefit payments. PBGC typically becomes the trustee of a single- employer DB plan when the employer that sponsors the plan declares bankruptcy and the plan has insufficient assets from which to pay all of its promised benefits. When PBGC becomes the trustee of a single-employer DB pension plan, plan participants receive their full benefits up to a statutory maximum benefit. Benefits that are higher than the maximum guarantee are reduced to the guarantee amount. The maximum guarantee for a single-employer pension that was terminated in 2009, the year of Delphi's bankruptcy, was $4,500 per month ($54,000 per year) for retirees who began receiving pensions for their remainder of their lives (a straight-life annuity) at the age of 65. The maximum benefit amounts are reduced so that retirees receive actuarially neutral pension benefits if they choose benefits in a form other a straight-life annuity or if they begin receiving benefits before or after the age of 65. For example, the maximum benefit for individuals in plans terminated in 2009, who retire at 65 years old, and chose a joint and 50% survivor annuity benefit was $4,050 per month ($48,600 per year). For retirees who chose to receive single life annuity benefits at 55 years old, the maximum benefit was $2,025 per month ($24,300 per year). PBGC reported in 2019 that 84% of retirees who receive benefits from PBGC are paid the full benefit amounts they earned under their retirement plans (i.e., do not have their benefits reduced to the maximum benefit guarantee). Background on Delphi Pension Plans In 1999, GM and some unions representing Delphi workers negotiated an agreement as part of the spin-off. Delphi's workforce consisted of hourly employees and salaried employees. In general, the hourly workers were union members whereas the salaried workers were not. The two groups of workers had separate benefit plans. To receive the unions' approval for the spin-off, GM agreed to protect certain post-retirement health and pension benefits for hourly workers. These Benefit Guarantee Agreements obligated GM, in the event of the termination of the Delphi hourly pension plans, to supplement the benefits for workers whose benefits were reduced due to PBGC's statutory maximum guarantee. GM agreed to pay (or top up) each covered employee the difference between the benefit received from PBGC and the benefit the individual would have received had the plan not been terminated. Six DB pension plans covered Delphi workers, of which the two largest were the Delphi Hourly-Rate Employees Pension Plan, with 47,176 participants in 2009, and the Delphi Retirement Program For Salaried Employees, with 20,203 participants in 2009. The four other DB plans had a total of 2,229 participants in 2009. Because they were non-union and therefore not subject to collective bargaining procedures, GM did not need the salaried workers' approval for the spin-off and salaried workers did not receive any benefit guarantees. Termination of Delphi Pension Plans Delphi filed for bankruptcy in October 2005. As part of the bankruptcy reorganization plan, GM agreed to the transfer of up to $3.4 billion of liabilities from the Delphi Hourly Plan to the GM Hourly-Rate Employees Pension Plan. GM initially transferred approximately $2.6 billion of liability from the Delphi Hourly Plan to the GM plan. On June 1, 2009, GM filed for bankruptcy and subsequently received U.S. government financial assistance to assist with its reorganization. In July 2009, GM advised Delphi that it would not assume the Hourly Plan and would not transfer additional liabilities from Delphi to the GM pension plan. Because GM declined to assume the additional liabilities

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