DELPHI PENSION 

PLANS 

GM Agreements with 

Unions Give Rise to 

Unique Differences in 

Participant Benefits 

Report to Congressional Requesters

December 2011 

GAO-12-168 

United States Government Accountability Office

GAO 
 United States Government Accountability Office 

Highlights of GAO-12-168, a report to 

congressional requesters 

December 2011 

DELPHI PENSION PLANS

GM Agreements with Unions Give Rise to Unique 

Differences in Participant Benefits 

Why GAO Did This Study 

The Pension Benefit Guaranty 

Corporation (PBGC) terminated the 

underfunded six qualified defined 

benefit (DB) plans of the Delphi 

Corporation, a former subsidiary of 

General Motors (GM), in July 2009. 

Given questions about how PBGC 

came to terminate the plans, whether 

treatment for certain Delphi workers 

was preferential, and the role of the 

U.S. Department of the Treasury 

(Treasury) in these outcomes, GAO 

was asked to answer the following 

questions: 

(1) What precipitated PBGC’s decision 

to terminate Delphi’s plans and what 

was Treasury's role, if any? 

(2) What actions did PBGC take to 

secure Delphi domestic and foreign 

assets as part of its recovery process? 

(3) Why will certain Delphi employees 

receive reduced pension benefits and 

others will not? 

(4) What information was 

communicated to employees about the 

termination of their plans? 

GAO issued a timeline of key events 

leading to the plans’ termination in 

March 2011 (GAO-11-373R). To 

examine the issues more fully for this 

report, GAO analyzed additional 

information from PBGC, Treasury, GM, 

Delphi, and Delphi employee groups 

and unions, and interviewed 

representatives from those 

organizations. For comparison 

purposes, GAO also reviewed the 

termination and recovery processes for 

all ten firms with the largest termination 

claims from plans trusteed by PBGC. 

Treasury’s comments generally agreed 

with GAO’s findings and conclusions. 

What GAO Found 

As a result of the termination of Delphi’s pension plans in July 2009 and statutory 

benefit limits, many Delphi retirees will receive less from PBGC than their full 

benefit promised by Delphi. However, some of those experiencing statutory 

reductions will still receive their full benefits because of union agreements with 

GM. With respect to PBGC's role in the process, the steps taken to terminate the 

plans and reduce some benefits according to statutory limits are consistent with 

PBGC’s usual actions when terminating large plans. 

 PBGC’s decision to terminate the plans was ultimately precipitated by the 

apparent lack of a viable sponsor, impending foreclosure on Delphi’s assets, 

and the prospect of increased losses for PBGC and the plans that would 

occur upon liquidation. Similar factors were often at play in PBGC’s decisions 

to terminate other large plans we reviewed. 

 PBGC used its authority under the law to file liens and negotiate recoveries 

of corporate assets on behalf of Delphi’s plans. Although PBGC ultimately 

recovered only about 6 percent of the total unfunded benefit liabilities in 

these plans, this ratio falls within the range of recovery ratios for other large 

terminated plans we reviewed. 

 Among the Delphi plan participants PBGC had reviewed as of June 2011, 

just under half of both hourly and salaried plan participants received 

reductions in their promised benefits due to the application of statutory 

benefit limits. While initial estimates indicate a higher proportion of Delphi 

retirees have been subject to the guarantee limits compared with retirees of 

most other large terminated plans, PBGC expects Delphi’s higher proportion 

to decline once all benefit calculations are finalized. 

 Delphi sent required communications to employees concerning deteriorating 

plan funding, and PBGC sent communications concerning plan termination 

and its impact on participants’ benefits. 

However, the role that GM played in the process was more unusual. Some Delphi 

hourly plan participants are protected from benefit losses caused by statutory limits 

because GM agreed to “top up” potential benefit losses for certain Delphi union 

employees. These agreements were renewed and upheld at numerous points in 

Delphi’s history, including by the “new GM” established in July 2009. Because of 

these agreements, about 60 percent of the participants in the hourly plan will have 

any statutory reductions in their benefits restored by GM. Other hourly employees, 

as well as all employees in Delphi’s salaried plan and the other smaller plans. were 

never covered by comparable top-up agreements. 

Although acknowledging the significant role Treasury played in GM's 

restructuring, GM and Treasury officials stated that Treasury’s role was advisory 

concerning GM’s decisions not to take on additional Delphi pension liabilities but 

to honor the top-up agreements with some unions. Similarly, PBGC officials 

stated that PBGC independently made the decision to terminate the plans. Still, 

in response to a prior GAO recommendation, Treasury revised its reporting policy 

to increase transparency on its activities related to the auto industry. GAO 

believes that the most effective means of addressing concerns about Treasury’s 

multiple roles regarding pensions is also through such increased transparency. 

View GAO-12-168. For more information, 

contact Barbara Bovbjerg at 202-512-7215 or 

bovbjergb@gao.gov. 
Page i GAO-12-168 Delphi Pension Plans 

Letter 1 

Background 3

Threat of Increased Losses Led PBGC to Terminate Delphi Pension 

Plans 10

PBGC Pursued Claims on Delphi’s Assets, Resulting in between 

$600 Million and $650 Million in Recoveries 21

Many Delphi Retirees Are Subject to Benefit Reductions and Only 

Certain Hourly Retirees Are Protected by Union Agreements 

with GM 28

Both Delphi and PBGC Provided Delphi Employees with 

Information 35

Concluding Observations 38

Agency Comments and Our Evaluation 39

Appendix I Single-Employer Firms with the Largest PBGC Claims for 

Terminated Plans (1975 through 2011) 41 

Appendix II Number and Percentage Delphi Retirees with Reductions in ERISA 

Benefits Due to Guaranteed Benefit Limits (as of June 1, 2011) 42 

Appendix III Allocation of Plan Assets and Recoveries to Unfunded 

Nonguaranteed Benefits 43 

Appendix IV Comments from the Department of the Treasury 48 

Appendix V GAO Contact and Staff Acknowledgments 50 

Related GAO Products 51

Tables 

Table 1: Terminated Delphi Defined Benefit Plans, as of July 31, 

2009 6

Contents 
Page ii GAO-12-168 Delphi Pension Plans 

Table 2: Types of Guaranteed Benefit Limits under ERISA 7

Table 3: Number and Percentage of Delphi Retirees Subject to 

Reductions in Estimated Benefits Due to ERISA Limits (as 

of June 1, 2011) 29

Table 4: Allocation Priority Categories (PC) 44

Table 5: Comparison of Allocation of Plan Assets and Recoveries 

among Plans of Firms with 10 Largest Claims 45

Figures 

Figure 1: Who Is Bearing the Cost of Delphi Pension Plans’ 

Unfunded Liabilities 20

Figure 2: PBGC Asset Recoveries in Delphi’s Bankruptcy 25

Figure 3: Distribution of Asset Recoveries by PBGC in Delphi’s 

Bankruptcy 27

Figure 4: Number of Delphi Employees Covered by GM Top-Ups, 

by Plan 34

Figure 5: Status of Benefits for Participants from Delphi’s Hourly 

and Salaried Plans (as of June 2011) 35

Abbreviations 

AIFP Automotive Industry Financing Program 

DB defined benefit plan 

DIP debtor-in-possession 

DSRA Delphi Salaried Retiree Association 

ERISA Employee Retirement Income Security Act of 1974 

GM General Motors 

IUE International Union of Electronic, Electrical, Salaried, Machine 

and Furniture Workers, AFL-CIO 

MSR mutually satisfactory retirement 

PBGC Pension Benefit Guaranty Corporation 

UAW International Union, United Automobile, Aerospace, and 

Agricultural Implement Workers of America 

USWA United Steelworkers of America 

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Page 1 GAO-12-168 Delphi Pension Plans 

United States Government Accountability Office 

Washington, DC 20548

December 15, 2011

Congressional Requesters

The Pension Benefit Guaranty Corporation (PBGC), the government 

corporation that insures private-sector defined benefit (DB) plans, 

terminated the six plans of Delphi Corporation (Delphi) in July 2009.1

Since the termination, there has been controversy over different pension 

benefit outcomes for certain unionized and non-unionized Delphi retirees. 

Further, the involvement of the U.S. Department of the Treasury 

(Treasury) in the bankruptcy of General Motors (GM), Delphi’s former 

parent company, raised questions for some regarding the role that 

Treasury played in PBGC’s decision to terminate Delphi’s pension plans 

and the resulting outcomes for Delphi plan participants. Given these 

concerns, you asked us to answer the following questions:

The 

plans were estimated to be underfunded by a combined $7.2 billion at 

termination, of which PBGC expects to cover about $6 billion.

1. What precipitated PBGC’s decision to terminate the plans and what 

was Treasury’s role, if any?

2. What actions did PBGC take to secure Delphi domestic and foreign 

assets as part of its recovery process?

3. Why will certain Delphi employees receive reduced pension benefits 

and others will not?

4. What information was communicated to employees about the 

termination of their plans?

In March 2011, we issued a report providing a timeline of key events 

related to the Delphi plan terminations in which we provided information 

about some of these issues.2

 

1

A DB plan promises a benefit that is generally based on an employee’s years of service 

and, often, compensation as well. The employer is generally responsible for funding all or 

most of the benefit, investing and managing plan assets, and bearing the investment risk. 

To address the issues more fully for this 

2

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

GAO-11-373R (Washington, D.C.: Mar. 30, 2011).

 
 

Page 2 GAO-12-168 Delphi Pension Plans 

report, we conducted additional analysis of PBGC documents, such as 

benefit estimates, actuarial reports, internal documents on the termination 

decision and on asset recovery, and reports from PBGC’s Office of 

Inspector General. We also conducted follow-up interviews with PBGC 

officials to clarify information from the documents. To explore further 

Treasury’s role in the termination of Delphi’s pension plans, we reviewed 

publicly available documents, such as Treasury officials’ depositions and 

other legal documents, including those related to pending litigation,3 and 

conducted additional interviews of GM, Delphi, and the Delphi Salaried 

Retiree Association (DSRA). We reviewed relevant e-mails provided by 

PBGC and DSRA.4

To provide benchmarks and comparative examples, we also gathered 

data about other terminated plans from PBGC’s list of firms with the ten 

biggest termination claims in PBGC’s history. (Delphi is number two on 

this list, behind United Airlines.)

We also interviewed union, GM, Delphi, and DSRA 

officials to obtain their perspectives on plan termination, asset recovery, 

benefit determination, and communications, as well as analyzed 

additional documents related to these issues from these groups, including 

data from GM about benefit guarantees they have paid or expect to pay 

to former Delphi employees.

5

 

3

Delphi Salaried retirees are in litigation against PBGC regarding termination of Delphi’s 

pension plans. Black v. PBGC, No. 2:09-cv-13616 (Bankr. E.D. Mich. filed Nov. 5, 2009). 

In September 2011, the court dismissed the retirees’ claims against Treasury and 

Treasury officials. Order Granting Defendant United States Department of the Treasury, 

Presidential Task Force on the Auto Industry, Timothy F. Geithner, Steven L. Rattner, and 

Ron. A. Bloom’s Reviewed Motion to Dismiss, No. 09-13616 (E.D. Mich. Sept. 1, 2011). It 

is GAO policy to avoid taking a position or addressing claims that are currently in litigation. 

This review was structured to avoid influencing or interfering with the litigation and this 

report does not address the legal issues involved in the litigation.

For example, to provide context for how 

PBGC pursued recoveries for Delphi, we reviewed the recovery process 

for all nine of the other firms on this list, and identified the allocation of 

recoveries across priority groups for all plans with more than 5,000 

participants (18 of the 29 plans these firms sponsored). We did not 

examine PBGC’s actions to date to value Delphi’s assets, as this effort is 

4

The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) is 

conducting an audit of Treasury’s role in GM’s decision to provide top-ups for certain 

hourly workers, including whether the Administration or Treasury pressured GM to provide 

additional funding for the hourly plan. SIGTARP has not announced when it expects to 

complete this audit.

5

See appendix I for a summary description of PBGC’s 10 largest terminations.
 

Page 3 GAO-12-168 Delphi Pension Plans 

still ongoing. PBGC’s Office of Inspector General has recently reported on 

deficiencies in PBGC’s efforts to value assets for two other firms on the 

top-10 list: National Steel and United Airlines.6

We conducted this work between April 2011 and December 2011 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We found the 

data from PBGC and GM sufficiently reliable for the purpose of helping us 

answer our research questions, and we believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives.

According to the Inspector 

General’s office, the contractor identified as having conducted the 

valuation of assets for both the National Steel and United Airlines 

terminations is not the contractor conducting the valuation of assets for 

Delphi.

Delphi was a global supplier of mobile electronics and transportation 

systems that began as part of GM and was spun off as an independent 

company in 1999.7

 

6

PBGC Office of Inspector General Evaluation Report, PBGC’s Plan Asset Audit of 

National Steel Pension Plans Was Seriously Flawed (OIG Eval-2011-10/PA-09-66-1, 

Washington, D.C.: Mar. 30, 2011); “

At that time, Delphi established two pension plans, 

with assets and liabilities transferred from their GM counterparts: the 

Delphi Hourly-Rate Employees Pension Plan (hourly plan) and the Delphi 

Retirement Program for Salaried Employees (salaried plan). When Delphi 

was spun off from GM in 1999, GM was required to collectively bargain 

with the affected unions—including International Union, United 

Automobile, Aerospace, and Agricultural Implement Workers of America 

(UAW); the International Union of Electronic, Electrical, Salaried, Machine 

Letter to Chairman Miller of The Committee on 

Education and Labor Regarding PBGC Termination of United Airlines Pension Plans” 

(LTR-2010-10, Washington, D.C.: Jul. 20, 2010); and PBGC Processing of Terminated 

United Airlines Pension Plans Was Seriously Deficient, (OIG, Eval-2012-05/PA-10-72, 

Washington, D.C: Nov. 30, 2011). 

7

For a more detailed treatment of this history, see GAO-11-373R. 

Background

Delphi-GM History
 

Page 4 GAO-12-168 Delphi Pension Plans 

and Furniture Workers, AFL-CIO (IUE);8 and the United Steelworkers of 

America (USWA); as well as other “splinter” unions.9 As a result of these 

negotiations, GM agreed to provide a retirement benefit supplement 

(referred to as “top-ups”) to “covered employees” with UAW, IUE, or 

USWA (but not the splinter unions), should the Delphi hourly plan be 

frozen or terminated.10

Over the period 2001 to 2005, Delphi suffered large losses, and the 

company filed for Chapter 11 bankruptcy in October 2005, although it 

continued to operate.

Covered employees included those who had been 

represented by these unions as GM workers and now as Delphi workers 

with no break in employment or seniority as of May 28, 1999. Salaried 

employees and hourly employees not in the three unions were not 

covered by top-up agreements.

11

 

8

Effective October 1, 2000, IUE merged with the Communications Workers of America to 

become the Industrial Division of CWA (IUE-CWA); for the purposes of this report, we 

continue to refer to this entity as the IUE.

Beginning in the fall of 2008, economic conditions 

deteriorated throughout the auto industry, affecting both Delphi and GM. 

GM’s deteriorating financial condition in the fall of 2008 led the company 

to seek assistance from Treasury through the Automotive Industry 

9

The splinter unions include the International Association of Machinists and Aerospace 

Workers; International Brotherhood of Electrical Workers; Michigan Regional Council of 

Carpenters, Local 687 and Interior Systems, Local 1045; International Brotherhood of 

Painters and Allied Trades of the United States and Canada, Sign & Display Union Local 

59; International Brotherhood of Teamsters; International Brotherhood of Boilermakers; 

International Union of Operating Engineers; and United Catering Restaurant Bar & Hotel 

Workers. 

10The top-up agreements were originally set to expire in October 2007. In June 2007, GM, 

Delphi, and UAW entered into a memorandum of understanding (MOU) extending the GM 

benefit guarantee for Delphi UAW workers, which would be enforceable if benefit accruals 

for future credited service in the Delphi hourly plan were frozen and if the plan were 

terminated. On August 5, 2007, GM and Delphi entered into a MOU with Delphi IUE, and 

on August 16, 2007, with Delphi USWA, providing the same top-up guarantee as the 

Delphi UAW MOU.

11Failing entities choose to go through Chapter 11 of the Bankruptcy Code when they 

hope to reorganize and stay in business rather than liquidate and go out of business. 11 

U.S.C. §§ 1101-1174.
 

Page 5 GAO-12-168 Delphi Pension Plans 

Financing Program (AIFP).12 As a condition of receiving this assistance, 

GM was required to develop a restructuring plan to identify how the 

company planned to achieve and sustain long-term financial viability. In 

April and May 2009, Treasury worked with GM to develop a restructuring 

plan through the Presidential Task Force on the Auto Industry and its 

staff. On June 1, 2009, GM filed for bankruptcy and sought the approval 

of the bankruptcy court for the sale of substantially all of the company’s 

assets to a new entity (“new GM”).13

Soon after, PBGC terminated Delphi’s six DB plans (Delphi having 

acquired four more since the spin-off from GM), effective July 31, 2009, 

with almost 70,000 participants (see table 1). According to PBGC, as of 

the termination date, the Delphi plans were underfunded by 

approximately $7.2 billion, of which PBGC insurance would cover an 

estimated $6.0 billion. In October 2009, after 4 years in bankruptcy, 

Delphi completed its reorganization when Delphi Automotive LLP (“new” 

Delphi), a United Kingdom limited partnership, purchased most of 

Delphi’s assets and GM purchased 4 other Delphi sites. “Old” Delphi 

became DPH Holdings Corp., an entity set up to sell or dispose of any 

remaining assets.

After the sale of the assets in July 

2009, new GM began operating with substantially less debt and Treasury 

received 60.8 percent equity and $2.1 billion in preferred stock in the new 

GM, and a $6.7 billion GM debt obligation.

 

12In December 2008, Treasury established AIFP under the Troubled Asset Relief Program 

(TARP) to help stabilize the U.S. automotive industry and avoid disruptions that would 

pose systemic risk to the nation’s economy. TARP was authorized under the Emergency 

Economic Stabilization Act of 2008 (EESA), Pub. L. No. 110-343 div. A, 122 Stat. 3765 

(codified as amended at 12 U.S.C. §§ 5201-5261). EESA originally authorized Treasury to 

purchase or guarantee up to $700 billion in troubled assets. § 115(a), 122 Stat. 3780. The 

Public-Private Investment Program Improvement and Oversight Act of 2009 amended 

EESA to reduce the maximum allowable amount of outstanding troubled assets under 

EESA by almost $1.3 billion, from $700 billion to $698.741 billion. Pub. L. No. 111-22, § 

402, § 402(f), 123 Stat. 1656, 1658. EESA requires that the appropriate committees of 

Congress be notified in writing when the Secretary of the Treasury, after consultation with 

the Chairman of the Board of Governors of the Federal Reserve System, determines that 

it is necessary to purchase other financial instruments to promote financial market 

stability. § 3(9)(B), 122 Stat. 3767 (codified at 12 U.S.C. § 5202(9)(B)).

13Throughout this report, in cases where a distinction is important, we refer to the prebankruptcy entity as “old GM” and the new one that purchased its operating assets as 

“new GM.” Prior to bankruptcy, old GM’s legal name was General Motors Corporation. 

The legal name of the new entity created in July 2009 was General Motors Company. As 

of October 19, 2009, General Motors Company became General Motors LLC.
 

Page 6 GAO-12-168 Delphi Pension Plans 

Table 1: Terminated Delphi Defined Benefit Plans, as of July 31, 2009 

Plan Number of participants 

Delphi Hourly-Rate Employees Pension Plan (hourly plan) 47,176 

Delphi Retirement Program For Salaried Employees 

(salaried plan) 

20,203 

Packard-Hughes Interconnect Non-Bargaining Retirement 

Plan 

1,383 

ASEC Manufacturing Retirement Program 533 

Packard-Hughes Interconnect Bargaining Retirement Plan 165

Delphi Mechatronic Systems Retirement Program 148 

Source: Pension Benefit Guaranty Corporation (PBGC).

PBGC was created as a government corporation by the Employee 

Retirement Income Security Act of 1974 (ERISA)14 to help insure the 

retirement income of U.S. workers with private-sector defined benefit 

plans. Under PBGC’s single-employer insurance program, if a company’s 

pension plan has inadequate funds to pay all promised benefits, plan 

sponsors meeting certain criteria can seek to terminate a plan through a 

“distress” termination.15 Under certain circumstances, PBGC may also 

decide to terminate an underfunded plan.16

PBGC pays participants’ benefits only up to certain limits set forth by 

ERISA and related regulations. Participants whose benefits under the 

plan would otherwise exceed these statutory limits may have their 

benefits reduced to the guaranteed amount, unless the plan has sufficient 

assets to pay the nonguaranteed portion of their benefits, either in part or 

In all these situations, PBGC 

is generally appointed trustee of the plan, as provided under ERISA, and 

assumes responsibility for paying benefits to the participants.

 

14Pub. L. No. 93-406, 88 Stat. 829 (codified, as amended, at 29 U.S.C. §§ 1001-1461).

15At least one of the following criteria must be present in order for PBGC to approve a 

distress termination: (1) liquidation in bankruptcy (Chapter 7) or insolvency proceedings; 

(2) reorganization in bankruptcy (Chapter 11); (3) inability to pay debts while in business 

without terminating a plan; or (4) unreasonably, burdensome pension costs caused solely 

by a decline in workers covered by the plan. 29 U.S.C. § 1341(c)(2)(B).

1629 U.S.C. § 1342(a).

ERISA Guarantee Limits, 

Benefit Determination
 

Page 7 GAO-12-168 Delphi Pension Plans 

in full. These guarantee limits include the phase-in limit, the accrued-atnormal limit, and the maximum limit, as illustrated in table 2.17

Table 2: Types of Guaranteed Benefit Limits under ERISA

Maximum limita Phase-in limitb Accrued-at-normal limitc

• The guaranteed benefit cannot exceed 

the statutory maximum, adjusted annually, 

at the time the plan terminates.

• In 2009 (the year Delphi’s plans were 

terminated), the maximum was $54,000 

per year for a person retiring at age 65 

and with no survivor benefit (that is, a 

single-life annuity).

• The maximum is lower for those retiring 

under age 65 or with a survivor benefit.

• The guaranteed benefit cannot 

include any benefit increase 

implemented through a plan 

amendment that was made 

within 1 year of the date of the 

plan termination.

• For benefit improvements that 

became effective more than 1 

year but less than 5 years prior 

to the plan’s termination, the 

guaranteed amount is the larger 

of 20 percent of the benefit 

increase or $20 per month of the 

increase for each full year the 

increase was in effect.

• The monthly guaranteed benefit cannot be 

greater than the monthly benefit provided 

as a straight-life annuity (that is, a periodic 

payment for the life of the retiree, with no 

additional payments to survivors) 

available at the plan’s normal retirement 

age.

• The portion of any combined early 

retirement benefit and supplemental 

benefit that exceeds the normal retirement 

age straight life annuity is not guaranteed.

Source: ERISA, PBGC’s implementing regulations, and related documents.

a

29 U.S.C. § 1322(b)(3); 29 C.F.R. § 4022.23 (2011). 

b

29 U.S.C. § 1322(b)(1) and (7); 29 C.F.R. § 4022.25 (2011). 

c

29 C.F.R. § 4022.21 (2011). 

Determining participants’ benefit amounts following plan termination is a 

complex process. It begins with PBGC gathering extensive data on plans 

and individuals’ work and personnel histories, and determining who is 

eligible for benefits under a plan, which can be more complicated if the 

company or plan has a history of mergers or elaborate structure or is 

missing data. It requires understanding plan provisions that vary from 

plan to plan and can be voluminous, applying the ERISA guarantee limits 

to each individual’s benefit, valuing plan assets and liabilities, and 

determining which participants may receive additional benefits from any 

assets PBGC may recover from the sponsor. Final determination of 

benefits can take years, especially in a large, complex plan.18

 

17For more details on how these limits affected Delphi participant benefits, see appendix II.

If the 

participant is already retired, or retires before the process is complete, 

18For more information on PBGC benefit determination, see GAO, Pension Benefit 

Guaranty Corporation: More Strategic Approach Needed for Processing Complex Plans 

Prone to Delays and Overpayments (GAO-09-716; Washington, D.C.: Aug. 2009).
 

Page 8 GAO-12-168 Delphi Pension Plans 

PBGC makes payments to the retiree initially based on an estimate of the 

final benefit amount. Once the process is complete, PBGC notifies each 

participant of the final benefit amount through a “benefit determination 

letter.” 

As of September 30, 2011, PBGC insured the benefits of about 44 million 

workers and retirees in more than 27,000 private DB plans. PBGC 

receives no funds from general tax revenue and is financed by premiums 

paid by DB plan sponsors, investment income, and assets that PBGC 

acquires when it assumes control of a plan.19 As of the end of fiscal year 

2011, PBGC had terminated and trusteed a total of 4,300 plans, and its 

net accumulated financial deficit totaled $26 billion.20

PBGC is governed by a three-member board of directors consisting of the 

Secretaries of the Treasury, Labor, and Commerce, who are responsible 

for establishing and overseeing the policies of the agency.

Additionally, at fiscal 

year-end, PBGC’s estimate of total plan underfunding in plans sponsored 

by financially risky single-employer program companies totaled 

approximately $227 billion, up significantly from $170 billion the year 

before.

21 According to 

PBGC, PBGC’s director is responsible for managing PBGC’s day-to-day 

operations, including, according to PBGC, such decisions as whether and 

when to terminate particular pension plans.22 We designated PBGC’s 

single-employer pension insurance program as “high risk” in 2003, 

including it on our list of major programs that need urgent attention and 

transformation.23

 

1929 U.S.C. § 1305.

In 2007 and 2008, we reported that PBGC’s board had 

20PBGC’s net accumulated financial deficit equals the total liabilities of the single employer 

program and the financial assistance unlikely to be repaid from the multiemployer 

program, less total assets in both programs.

2129 U.S.C. § 1302(d) and (f) and 29 C.F.R. § 4002.3 (2011). 

22ERISA specifies that in carrying out PBGC’s functions, PBGC is to be administered by 

its director. 29 U.S.C. § 1302(a).

23GAO, Pension Benefit Guaranty Corporation Single-Employer Insurance Program: LongTerm Vulnerabilities Warrant ‘High Risk’ Designation, GAO-03-1050SP (Washington, 

D.C.: July 2003).

PBGC Finances and 

Governance
 

Page 9 GAO-12-168 Delphi Pension Plans 

limited time and resources to fulfill its responsibilities.24 The program, 

along with PBGC’s other insurance program, remains high risk due to an 

ongoing threat of losses from the terminations of underfunded plans.

In previous reports, we also have examined the challenges posed to 

Treasury due to its multiple roles as a private pension regulator 25 and a 

GM shareholder, as well as having its Secretary serve on the PBGC 

board.

26 In its role on PBGC’s board and as a pension regulator, Treasury 

has an interest in protecting the viability of private defined benefit pension 

plans and the retirement incomes of plan participants. But as a GM 

shareholder, Treasury has an interest in the financial well-being of GM.

Recognizing the potential for interested parties to perceive possible 

conflicts, we reported that Treasury has taken several steps to mitigate 

this risk. For example, the department adopted core principles to guide its 

oversight of its investments under TARP and limit its involvement in dayto-day operations of companies. The department also has taken steps to 

establish a protective barrier between Treasury officials who make policyrelated decisions with respect to investments in the automakers and the 

Treasury officials who are responsible for regulating pensions or 

overseeing the operations of PBGC. Nevertheless, we noted that the 

tensions inherent in Treasury’s multiple roles remained.27

 

24GAO, Pension Benefit Guaranty Corporation: Governance Structure Needs 

Improvements to Ensure Policy Direction and Oversight, 

In one previous 

report, we concluded that Treasury’s investment in the auto companies 

created an enhanced need for transparency, and we recommended that 

GAO-07-808 (Washington, D.C.: 

July 2007); GAO, Pension Benefit Guaranty Corporation: Need for Improved Oversight 

Persists, GAO-08-1062 (Washington, D.C.: September 2008).

25The Internal Revenue Service (IRS), within Treasury, oversees the tax qualified status of 

pension plans. 26 U.S.C. § 401(a). 

26See GAO, Troubled Asset Relief Program: Automaker Pension Funding and Multiple 

Federal Roles Pose Challenges for the Future, GAO-10-492, (Washington, D.C.: April 6, 

2010); GAO, Troubled Asset Relief Program: The U.S. Government Role as Shareholder 

in AIG, Citigroup, Chrysler, and General Motors and Preliminary Views on its Investment 

Management Activities, GAO-10-325T (Washington, D.C.: Dec. 16, 2009); GAO, Troubled 

Asset Relief Program: Status of Efforts to Address Transparency and Accountability 

Issues, GAO-09-296 (Washington, D.C.: Jan. 30, 2009); and GAO, Troubled Asset Relief 

Program: Additional Actions Needed to Better Ensure Accountability, Integrity, and 

Transparency, GAO-09-161 (Washington, D.C.: Dec. 2, 2008).

27For more on this topic, see GAO-10-492, pp. 42-45.

Treasury’s Multiple Roles
 

Page 10 GAO-12-168 Delphi Pension Plans 

Treasury should regularly communicate to Congress about TARP 

activities to ensure accountability and provide added assurances that the 

taxpayers’ investment is being appropriately safeguarded.28 In a 

subsequent report, we reiterated this recommendation, and noted that by 

providing a more complete picture of the companies’ financial 

performance, Treasury also could help mitigate potential or perceived 

tensions in its multiple roles.29 Although Treasury had initially expressed 

concerns about disclosing proprietary information in a competitive market, 

it agreed to provide information on its oversight of the companies’ 

performance that balances the need for transparency with the need to 

protect certain proprietary business information.30

PBGC’s decision to terminate the Delphi DB plans was precipitated by 

Delphi’s inability to fund or maintain its plans and by the threat of 

increased losses from Delphi’s impending loan default and possible 

liquidation. Treasury, as GM’s primary lender in bankruptcy, played a 

significant role in helping GM resolve the Delphi bankruptcy to arrive at 

the “best resolution” from GM’s perspective.31 However, with regard to 

GM’s decisions regarding the assumption of Delphi’s plans and top-up 

agreements, Treasury played an advisory role only, according to GM and 

Treasury officials. Similarly, according to PBGC officials, PBGC 

independently decided to terminate the Delphi plans. The documents we 

reviewed, including GM and Delphi SEC filings and PBGC internal 

records, are consistent with these statements. 

 

28GAO, Troubled Asset Relief Program: Continued Stewardship Needed as Treasury 

Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM, 

GAO-10-151 (Washington, D.C.: Nov. 2, 2009). Specifically, we recommended that 

Treasury report to Congress on how it planned to assess and monitor GM’s and Chrysler’s 

performance to help ensure the companies are on track to repay their loans and to return 

to profitability. 

29GAO-10-492. 

30Because of Treasury’s concerns about disclosing proprietary information in a 

competitive market, Treasury responded to our recommendation by providing GAO, as a 

congressional oversight body, with information on how it was using sensitive business 

information to oversee the companies’ performance. This approach was consistent with 

our recommendation that noted the need for transparency to be balanced with protecting 

certain propriety information. 

31Deposition of Matthew Feldman, Black v. PBGC, No. 04-44481 (RDD) (S.D. N.Y. July 

21, 2009). 

Threat of Increased 

Losses Led PBGC to 

Terminate Delphi 

Pension Plans 
 

Page 11 GAO-12-168 Delphi Pension Plans 

PBGC officials said the agency would have preferred to have Delphi 

emerge from bankruptcy and continue to sponsor the plans rather than

terminate them. Delphi had announced in March 2006 that a key objective 

in restructuring was to continue to sponsor both the hourly and salaried 

DB plans. Therefore, PBGC’s activities were focused on allowing the 

plans to continue after Delphi exited bankruptcy and having a reorganized 

Delphi continue to fund the plans. While PBGC has authority under 

ERISA to involuntarily terminate a plan that fails to meet certain 

conditions,32

The vision was not realized, however. The Delphi bankruptcy court 

confirmed Delphi’s reorganization plan in January 2008, but on April 4, 

2008, Delphi’s investors retracted an offer that would have executed the 

plan and prevented the termination of its pension plans. Delphi also 

negotiated with GM, Delphi’s former parent company, to assume Delphi’s 

hourly plan, but these efforts were only partially successful. Under a 

change to an agreement initially negotiated between the companies in 

2007, GM would assume the hourly plan in two phases; this would reduce 

Delphi’s overall pension liabilities and make it more attractive to investors, 

while Delphi would continue sponsoring the salaried plan. After making 

some changes to the agreement, the first phase occurred in September 

2008, transferring approximately $2.1 billion in net liabilities from Delphi to 

GM. However, the second phase, in which GM would have absorbed 

substantially all of the remaining hourly plan liabilities, was conditional on 

Delphi successfully reorganizing.

PBGC officials said that they hoped that avoiding termination 

would save both the agency and plan participants from potential losses 

from unfunded plan benefits.

33 In July 2009, after Delphi’s attempts to 

reorganize failed, and with GM in its own bankruptcy, GM decided not to 

take on the remaining liabilities of Delphi’s hourly plan. According to 

representatives of GM, after it was clear Delphi would not be able to 

reorganize, Delphi asked GM to take the salaried plan as well; however, 

GM declined.

 

32Under ERISA, PBGC has authority to involuntarily terminate a plan that fails to meet 

minimum funding standards, will be unable to pay benefits due, failed to make quarterly 

contributions, or is reasonably expected to increase long term losses to PBGC if not 

terminated. 29 U.S.C. § 1342(a).

33Delphi also agreed that the reorganized Delphi would provide GM with up to a $2.055 

billion administrative claim.

PBGC Initially Focused on 

Delphi or Another 

Company Continuing the

Plans
 

Page 12 GAO-12-168 Delphi Pension Plans 

By 2009, PBGC determined that the economic decline and the collapse of 

the U.S. auto industry had diminished the likelihood that Delphi, GM, or 

another company would be able and willing to sponsor Delphi’s plans. 

Moreover, it became apparent to PBGC officials that PBGC’s potential 

losses could grow if it waited. Delphi net sales, already on a steady 

decline since 2003, had fallen 50 percent between 2008 and 2009, and 

funding for Delphi’s plans had been eroding since 2007.34

According to PBGC officials, the likelihood that Delphi would default on its 

debtor-in-possession (DIP) loan, and the potential impact on PBGC 

recoveries, moved them in April 2009 to decide to terminate the Delphi 

plans. Delphi’s SEC filing that month stated that Delphi’s short-term loan 

from its DIP lenders was due to expire, and that extension of the loan was 

conditional on Delphi (1) delivering the lenders terms, agreed to by 

Treasury and GM; and (2) finalizing GM’s contributions to the resolution 

of Delphi’s bankruptcy. The filing noted that failure to meet these terms 

would trigger a requirement that Delphi make a $117 million repayment 

obligation on April 20. With Delphi unlikely to make this payment, it was 

possible that the lenders would foreclose on Delphi assets held as 

collateral. Foreclosure would have threatened PBGC’s ability to recover 

Delphi Corporation assets on behalf of its plans, which would in turn have 

increased PBGC’s and Delphi plan participant losses from plan 

termination. With a deteriorating auto industry and no foreseeable 

sponsor for the Delphi plans, and with potential recoveries threatened, 

PBGC concluded that the agency’s long-run loss would increase if the 

plans were not terminated.

Delphi’s largest 

customer, GM, amidst the lowest per-capita vehicle sales in 50 years, 

requested financial assistance from the U.S. government in December 

2008. These conditions diminished the likelihood that Delphi would be 

able to continue operating and maintain its pension plans.

Ultimately, however, PBGC postponed termination. The urgency to 

terminate in April, was reduced after Delphi’s DIP lenders offered PBGC a 

5-business day notice prior to foreclosing, fearing, according to PBGC, 

 

34Different estimates, done on different dates and using different methodologies intended 

for different purposes, measured varying degrees of funding in Delphi’s salaried plan. 

According to Delphi, the salaried plan was 53.7 percent funded as of year-end 2008 and 

was still 53.7 percent funded as of the date of plan termination on July 31, 2009. DSRA, 

based on an actuarial evaluation by Watson Wyatt, reported the salaried plan was 85.6 

percent funded as of October 1, 2008. PBGC measured salaried plan funding at 48 

percent as of termination on July 31, 2009.

Lack of a Willing Sponsor 

and the Risk of Additional 

Losses Prompted PBGC to 

Terminate
 

Page 13 GAO-12-168 Delphi Pension Plans 

that termination of Delphi’s pension plans would reduce Delphi’s value. In 

a June 1, 2009, press release, Delphi stated that the hourly plan would 

“be addressed” by GM and that PBGC “may” terminate the salaried and 

four smaller plans. According to Treasury, PBGC later confirmed that GM 

was not an alternative sponsor for the Delphi hourly plan. On June 30, 

2009, a meeting took place between PBGC and Treasury to discuss the 

Delphi plans; according to PBGC, Treasury informed PBGC officials that 

GM would not assume the remaining Delphi hourly pension liabilities. 

Finally, on July 15, 2009, Delphi’s DIP lenders gave PBGC a notice of 

foreclosure under the April agreement. With no willing and viable sponsor, 

PBGC officials expected the plans would be abandoned with no sponsor 

to pay benefits as they came due. On July 22, 2009, PBGC announced 

that Delphi’s plans would be terminated. The termination date was set to 

be July 31, 2009, and PBGC officially became the trustee of the plans on 

August 10, 2009. Delphi’s claim was the second largest in PBGC’s 

history, following United Airlines as the largest.

Our examination of PBGC termination decisions for nine of its ten largest 

insurance claims (Delphi’s being the tenth) shows the agency making 

assessments similar to those it made for the Delphi pension plans. In 

each case, we found that PBGC evaluated the future viability of the plans 

when making such decisions. For example, PBGC considered the 

likelihood of the company securing investment or more generally exiting 

bankruptcy as the plan’s sponsor, or, alternatively, of an asset purchaser 

assuming the plan. PBGC also assessed future plan funding. For 

example, staff recommended termination of Weirton Steel’s plan 

expecting that plan funding would soon decline. Weirton Steel, pursuing 

two tracks to exit bankruptcy, both of which assumed plan termination, 

filed an emergency motion seeking court approval to lay off 175 

management employees, which would have triggered additional benefits 

totaling up to $270 million. PBGC expected the layoffs to significantly 

reduce the funding of Weirton’s already underfunded pension plan and 

terminated the pension plan before the plan’s funding was affected.

As GM’s primary lender in bankruptcy, Treasury played a significant role 

in helping GM resolve the Delphi bankruptcy in terms of GM’s interests. 

Treasury’s guiding principle was to see the bankruptcy resolved with the 

least possible amount of investment by GM while still preserving GM’s 

supply chain. However, with regard to GM decisions about the Delphi 

pension plans—their sponsorship and the decision to honor existing topup agreements—court filings and statements from GM and Treasury 

officials support that Treasury deferred to GM’s business judgment. 

Treasury Was Involved as

GM Determined How Best 

to Resolve the Delphi 

Bankruptcy
 

Page 14 GAO-12-168 Delphi Pension Plans 

According to Treasury officials, Treasury agreed with GM’s assessment 

that the company could not afford the potential costs of sponsoring the 

Delphi hourly plan. With regard to the top-ups, Treasury officials said that 

while Treasury did not explicitly approve or disprove of GM’s agreement 

to honor previously negotiated top-up agreements with some unions, it 

agreed that GM had solid commercial reasons to enter into such 

agreement. Similarly, PBGC officials have maintained that their agency’s 

decision to terminate the Delphi plans was made independent of input 

from Treasury.

From Treasury’s initial discussions about Delphi’s pensions with PBGC in 

April 2009 until after GM’s bankruptcy filing on June 1, 2009, Treasury 

had anticipated that Delphi’s salaried pension plan would be terminated 

by PBGC, but that GM would assume the remaining portion of Delphi’s 

hourly plan, as called for in phase 2 of the September 2008 agreement. 

With respect to the salaried plan, according to Treasury officials, Treasury 

agreed with GM’s rationale not to assume the now underfunded Delphi 

salaried plan, since that plan had been fully funded when GM transferred 

it to Delphi in 1999.35 With respect to the hourly plan, however, a 

Treasury official’s deposition indicates that Treasury thought it was 

reasonable for GM to assume the Delphi hourly plan for UAWrepresented workers, given the UAW’s continuing role with the new GM 

and the fact that the hourly plan, which covered both the UAW and other 

union-represented workers, had not been fully funded at the time the plan 

was transferred from GM to Delphi in 1999.36

According to our review of the records, Treasury was involved in 

discussions with PBGC and GM prior to GM’s bankruptcy filing, on how to 

address Delphi’s pensions. Specifically, according to the Treasury 

official’s deposition, initial discussions with PBGC, GM, and Treasury in 

 

35According to data provided by Delphi, based on a fair market valuation of plan assets 

the Delphi salaried plan was 108.8 percent funded as of year-end 1998 and 122.7 percent 

funded as of year-end 1999. (“Fully funded” means that as of a particular date, plan assets 

equal or exceed the relevant measure of plan obligations.) However, for the typical 

pension plan invested in a mix of stocks and bonds, measures of funded status can be 

highly volatile, so that a plan that is fully funded on one date could be substantially less 

than fully funded on a subsequent date

36According to the deposition, Treasury was not focused on the other unions’ plans at this 

time but was concerned about UAW because of UAW’s role for new GM. According to 

data from Delphi, the hourly plan was 69.1 percent funded as of year-end 1999, 

measuring assets on a fair market value basis. 

Decisions Related to Plan 

Sponsorship
 

Page 15 GAO-12-168 Delphi Pension Plans 

April and May 2009 centered on trying to reach an agreement under 

which, among other things, the Delphi salaried plan would be terminated 

and GM would assume the hourly pension plan. According to the 

deposition, as of May 28, 2009, there was a general agreement with 

PBGC that, if GM had been willing to take on the hourly plan, the salaried 

plan would be terminated and PBGC would have an administrative claim 

on the Delphi bankruptcy. In exchange, PBGC would release the liens on 

Delphi’s foreign assets and have an unsecured claim for an undefined 

amount. According to PBGC officials, there were discussions in April and 

May 2009 around the topic of how to deal with Delphi’s pension plans in 

light of the collapse of the auto market and growing concerns about 

Delphi’s inability to maintain its pension plans and imminent liquidation, 

as well as GM’s own financial difficulties and impending bankruptcy. 

However, PBGC officials told us that at this time, they had not reached 

any agreement with GM or Delphi regarding the future of the Delphi

pension plans or settlement of PBGC liens and other claims that might 

arise from the termination of one or more of Delphi’s pension plans.

According to court filings, GM officials first informed Treasury that they 

had concerns about taking on the hourly plan and had not built the cost of 

doing so into its restructuring plan on June 3, 2009—shortly after GM’s 

bankruptcy filing. In June 2009, GM developed and provided Treasury 

with an assessment of the costs of Delphi’s pensions, which explained 

that the restructuring plan did not assume the transfer of remaining Delphi 

hourly or salaried plans. The assessment also stated that, subject to 

certain conditions, GM was obligated to absorb the second transfer of 

Delphi’s hourly plan but did not expect Delphi to meet those conditions.37

GM also noted that it was not obligated to absorb Delphi’s salaried plans. 

After reviewing GM’s calculations and engaging in discussions with GM’s 

pension team, Treasury agreed with GM’s assessment that taking on the 

Delphi hourly plan was a “3 billion dollar liability that General Motors could 

not afford.”38

 

37The assessment added that the since the first transfer in September 2008, the unfunded 

liability for the remainder of Delphi’s hourly plan had increased from $1.5 billion to 

approximately $3.2 to 3.5 billion as of March 31, 2009

In a legal brief, Treasury has asserted that the department 

38Upon termination in July 2009, PBGC calculated that the hourly plan underfunding 

totaled $4.4 billion. 
 

Page 16 GAO-12-168 Delphi Pension Plans 

did not dictate what should be done with the Delphi pensions and that 

Treasury agreed with GM’s decisions.39

According to PBGC, Treasury did not play an active role in PBGC’s 

decision to terminate the Delphi plans, although the Secretary of the 

Treasury is one of PBGC’s three PBGC board members. Specifically, 

according to PBGC officials, PBGC’s director informed the board of

PBGC’s decision to seek termination of the Delphi plans, gave the board 

advance notice of its subsequent implementation of that decision, and 

routinely kept the board informed of the agency’s actions in the Delphi 

bankruptcy case, consistent with PBGC’s practice in other large cases. 

The law gives the board responsibility to establish and oversee PBGC 

policies,40 but according to PBGC, the board decides broad policy issues 

that may arise from cases without getting involved directly in those cases. 

For their part, Treasury officials acknowledged that the department had 

multiple roles in this process by virtue of its roles in PBGC oversight and 

in managing the U.S. investment in new GM, but noted that Treasury 

does not communicate with PBGC about its GM investment activities.41

Moreover, in response to questions from Congress, the Treasury 

Secretary stated that Treasury did not make the decision to terminate 

Delphi’s pension plans.42

Although GM decided not to assume the second installment of Delphi’s 

hourly plan, it did decide to honor existing top-up agreements for 

commercial reasons that Treasury found reasonable. As noted in a 

Treasury official’s deposition, during GM’s bankruptcy process, GM was 

prepared to honor the obligation of providing top-ups to Delphi UAW 

retirees, while the situation was less clear regarding comparable 

agreements with IUE and USWA. GM officials told us that the company 

agreed to honor the top-up agreement with the UAW during its 

restructuring because of its dependence on the union, whose members 

 

39Mot. Def. U.S. Dep’t Treas,., Pres. Task Force on Auto Indus., Timothy F. Geithner, 

Steven L. Rattner, Ron. A. Bloom, Dis., or Alt. Summ. J. at 24, Black v. PBGC, No. 2:09-

cv-13616-AJT-DAS (E.D. Mich. Feb. 16, 2010).

4029 U.S.C. § 1302(d) and (f).

41GAO-10-492. 

42The Federal Bailout of AIG: Hearing before the House Committee on Oversight and 

Government Reform, 111th Cong. (2010) (answers to questions for the record from 

Timothy Geithner, Secretary of the Treasury).

Decisions Related to Top-Up 

Agreements 
 

Page 17 GAO-12-168 Delphi Pension Plans 

made up a substantial part of GM’s workforce. GM agreed to provide topups to the Delphi UAW retirees as part of GM’s master sale and purchase 

agreement, to which Treasury gave its approval.43

While new GM maintained that it was not obligated to provide top-ups to 

Delphi IUE and USWA retirees, it did have reason to want to resolve 

Delphi’s bankruptcy, given GM’s reliance on Delphi for parts.

The agreement did not 

include top-ups for IUE and USWA-represented employees, nor for the 

splinter unions or the salaried employees, who had no previous top-up 

agreements with GM.

44

 

43In re General Motors Corp, 407 B.R. 463, 481 (Bankr. S.D.N.Y. 2009) (Decision on 

debtor’s motion for approval of (1) sale of assets to Vehicle Acquisitions Holdings LLC; (2) 

assumption and assignment of related executory contracts; and (3) entry into UAW retiree 

settlement agreement). The master sale and purchase agreement outlined, among other 

things, the assets being sold by old GM to new GM and the liabilities being assumed by new 

GM from old GM. 

Moreover, 

IUE and USWA, which still represented part of Delphi’s workforce, 

needed to give their consent to finalize the sale of assets in Delphi’s 

bankruptcy. According to a GM official’s court declaration, a prolonged 

cessation in the supply of parts from Delphi to GM would have had a 

“devastating effect on GM, its ability to reorganize, and the communities 

that depend on employment by GM and its community of parts 

44According to a July 2009 declaration of a GM official, since the spin-off from GM, Delphi 

was GM’s largest component parts supplier, accounting for approximately 11.3 percent of 

GM’s North American purchases and 9.6 percent of GM’s global purchases in 2008.

Declaration of Randall L. Pappal in Support of Debtors’ Motion for Entry of Order 

Approving (I) Master Disposition Agreement for Purchase of Certain assets of Delphi 

Corp., (II) Related agreements, (III) Assumption and Assignment of Executory Contracts, 

(IV) Agreement with PBGC, and (V) Entry into Alternative Transaction in Lieu Thereof, at 

4, In re General Motors Corp., No. 09-50026 (Bankr. S.D.N.Y. July 8, 2009). 
 

Page 18 GAO-12-168 Delphi Pension Plans 

suppliers.”45 According to a Treasury official’s deposition, Treasury was 

kept apprised of GM’s ongoing bargaining with IUE and USWA on a 

variety of issues, including the top-ups.46

Although Treasury officials said that Treasury did not explicitly approve or 

disapprove of GM providing top-ups to the Delphi UAW, USWA, and IUE 

retirees, Treasury did subsequently comment on GM’s decision. In a legal 

brief, Treasury stated that GM had solid commercial reasons for providing 

the top-ups.

Additionally, according to 

Treasury officials, Treasury’s consent for transactions greater than $100 

million, which had been required prior to GM’s bankruptcy, was not 

required of new GM and therefore, was not required when the settlement 

agreement was signed, 2 months after new GM began operations. 

Negotiations resulted in an agreement, on September 10, 2009, between 

new GM, old GM, IUE, and USWA that, among other things, honored the 

top-ups to the retirees of Delphi who were represented by these unions 

and who were covered by the 1999 top-up agreements. According to the 

agreement, the parties entered into it after consideration of the factual 

and legal arguments regarding these issues, as well as the costs, risks, 

and delays associated with litigating these issues.

47

 

45Declaration of Randall L. Pappal in Support of Debtors’ Motion for Entry of Order 

Approving (I) Master Disposition Agreement for Purchase of Certain assets of Delphi 

Corp., (II) Related agreements, (III) Assumption and Assignment of Executory Contracts, 

(IV) Agreement with PBGC, and (V) Entry into Alternative Transaction in Lieu Thereof at 4, 

In re General Motors Corp., No.09-50026 (Bankr. S.D.N.Y. July 8, 2009). The declaration 

stated that Delphi was a sole-source, just-in-time supplier of many critical parts to GM, 

including parts that are used in almost every GM product line in North America and 

identified several ways that a cessation of parts delivery by Delphi could affect GM, 

including that (1) most parts that Delphi manufactures for GM are not readily available 

from an alternate source, and while GM could accelerate efforts to resource Delphi parts 

in the event of a supply interruption, the sheer magnitude of the parts to be resourced and 

revalidation required would take at least several months to achieve; (2) because GM 

operates on a just-in-time inventory delivery system, GM plants relying on just-in-time 

shipments may run out of inventory of such parts and have to shut down within a matter of 

days, if Delphi ever ceased shipping even a small fraction of production parts to GM; and 

(3) the shutdown of GM plants as a result of termination of deliveries of affected parts from 

Delphi could idle tens of thousands of GM workers, significantly decrease GM’s revenues, 

and increase GM’s costs to expedite resourcing efforts. 

Specifically, Treasury stated that its aim in negotiating the 

details of GM’s reorganization plan was to ensure that new GM would 

assume only those liabilities of old GM that were “commercially 

46Deposition of Treasury Official, No. 04-44481 (RDD) (S.D. N.Y. July 21, 2009). 

47Mot. Def. U.S. Dep’t Treas. at 28. 
 

Page 19 GAO-12-168 Delphi Pension Plans 

necessary” in order for new GM to operate. Treasury noted in the brief 

that because of new GM’s dependence on the UAW workforce and the 

costs, risks, and delays associated with litigating USWA’s and IUE’s 

claims related to the Delphi bankruptcy, new GM had solid commercial 

reasons to agree to provide the top-ups to the Delphi UAW, USWA, and 

IUE retirees. Additionally, Treasury officials noted that, unlike the hourly 

plan, the salaried plan was fully funded at the time GM transferred it to 

Delphi, and that because GM was never obligated to provide top-ups to 

the salaried or other retirees not represented by UAW, IUE, and USWA.

As a result of GM’s decisions to pay top-up benefits to those participants 

covered by the agreements and to take back a portion of the Delphi 

hourly plan in September 2008, GM will bear some of the costs of 

Delphi’s unfunded pension liabilities (see fig. 1). Retirees who experience 

benefit reductions that are not topped up by GM will also bear a portion of 

the cost through their reduced benefits. However, PBGC will bear the 

biggest burden—about $6 billion in unfunded guaranteed benefits across 

all six of Delphi’s DB plans.
 

Page 20 GAO-12-168 Delphi Pension Plans 

Figure 1: Who Is Bearing the Cost of Delphi Pension Plans’ Unfunded Liabilities

a

GM estimated the cost for top-up benefits in December 2010. GM’s top-up estimate is higher than 

PBGC’s estimate for the hourly plan’s total amount of unfunded nonguaranteed benefits because GM 

will pay some benefits not included in PBGC’s calculations. For example, unlike PBGC’s estimate, 

GM’s estimate includes obligations to provide up to 7 years of accrued benefits for certain employees 

covered under the top-up agreement who were not eligible to retire as of the plan termination date, 

but who became (or will become) eligible to retire under a normal or voluntary retirement during this 

7-year window. In addition, GM’s estimate includes obligations to provide covered employees who 

retired under the mutually satisfactory retirement (MSR) option, for which GM will pay the difference 

between the PBGC deferred vested pension benefit and the Delphi MSR benefit amount. 
 

Page 21 GAO-12-168 Delphi Pension Plans 

PBGC took actions during Delphi’s bankruptcy to protect plan funding and 

recover assets from Delphi, eventually recovering between $600 and 

$650 million against the $7.2 billion in total unfunded plan benefits. PBGC 

negotiated value for its claims and liens with Delphi and GM, releasing 

them for a settlement generating cash and other recoveries. The process 

for distributing these recoveries is laid out in ERISA,48 PBGC 

regulations,49 policies, and procedures. Because of the large gap 

between plan assets and liabilities in Delphi’s plans relative to PBGC’s 

recoveries, its recoveries are expected to have only a modest impact on 

the benefits of only some participants.

Upon the termination and trusteeship of an underfunded single-employer 

plan, PBGC generally takes control of all plan assets, but PBGC also has 

authority to recover additional money from company assets outside of its 

pension plans. ERISA provides that when underfunded single-employer 

plan is terminated, the plan sponsor and other entities under common 

control (the controlled group)50 are “jointly and severally”51 liable to PBGC 

for any unpaid premiums52 and the amount of any unfunded benefit 

liability.53 In addition, a plan sponsor is required under ERISA to 

periodically make certain minimum contributions to its plan,54 and—along 

with other members of the controlled group—is liable to a plan for any 

required contributions not made by the date due.55

 

4829 U.S.C. § 1344.

49See 29 C.F.R. pt. 4044 (2011).

50The controlled group consists of the plan sponsor and other entities under common 

control, determined generally as prescribed under 26 U.S.C. § 1563(a), 29 U.S.C. § 

1301(a)(14), and 26 C.F.R. § 1.414(b)-1 (2011).

51Joint and several liability is when a creditor may sue one or more of the parties 

separately, or sue all of them.

5229 U.S.C. §1307(c).

5329 U.S.C. § 1362(a).

5429 U.S.C. §§ 1082 and 1083.

5529 U.S.C. § 1082(b)(1) and (2).

PBGC Pursued Claims 

on Delphi’s Assets, 

Resulting in between 

$600 Million and $650 

Million in Recoveries

PBGC Pursued Statutory 

Claims Arising against 

Delphi’s Assets
 

Page 22 GAO-12-168 Delphi Pension Plans 

ERISA imposes a lien that can only be officially filed (“perfected”)56 by 

PBGC on behalf of a plan in the amount of the aggregate missed 

contribution payments, when the total of those missed payments exceeds 

$1 million.57 PBGC first filed liens on behalf of the Delphi plans, for 

missed required contributions of $75,177,000, in March 2006.58 From 

2006 to 2009, PBGC filed liens on behalf of the Delphi plans in response 

to Delphi’s failing to contribute to its plans in the amounts required by 

statutory minimum funding standards. As of the termination of the Delphi 

plans in July 2009, PBGC held $195.9 million in perfected liens on behalf 

of the salaried plan and a combined $9.2 million on behalf of Delphi’s 

smaller pension plans, for a total of $205 million in secured claims. PBGC 

officials told us they filed these liens for missed contributions only on the 

assets of Delphi’s foreign subsidiaries because Delphi’s domestic assets 

were shielded from PBGC liens by the automatic stay in Delphi’s 

bankruptcy.59

 

56A lien is perfected by filing it as prescribed in the relevant jurisdiction. Perfecting a lien 

provides constructive notice of its existence to all third parties and gives it priority over any 

later-perfected liens. In a bankruptcy, a properly perfected lien becomes a secured claim; 

an unperfected lien is treated the same as a general unsecured claims. All creditors with 

secured claims must receive payment in full (or up to the total value of their security) 

before those with general unsecured claims receive any payment at all.

In addition, prior to the transfer of $2.1 billion in net 

liabilities to GM’s hourly plan, PBGC also held liens on behalf of Delphi’s 

hourly plan, reflecting missed required contributions to that plan. 

However, according to PBGC, the transfer of a portion of Delphi’s hourly 

plan in September 2008 eliminated the hourly plan’s accumulated funding 

deficiency, eliminating the legal basis for any liens for missed 

contributions up to that point in time. Following the transfer, the 

contribution due to Delphi’s hourly plan for the final plan year was $194 

million. However, according to PBGC officials, because no quarterly 

contributions were due, that final $194 million catch-up payment was not 

due until June 15, 2010, well after the plan was terminated, and therefore, 

a lien did not arise.

5729 U.S.C. § 1083(k).

58The Internal Revenue Code requires single employer plan sponsors to make a certain 

amount of periodic contributions to their DB plans and maintain minimum funding 

standards. 26 U.S.C. § 412.

59Filing for bankruptcy operates as an automatic stay barring anyone from, among other 

things, perfecting or enforcing liens against the filing party. 11 U.S.C. § 362(a)(4).
 

Page 23 GAO-12-168 Delphi Pension Plans 

ERISA also establishes a lien on behalf of PBGC in the amount of any

unfunded benefit liability as of the plan’s termination date, up to an

amount not in excess of 30 percent of the controlled group’s net worth60

However, when a firm is in bankruptcy—as was the case with Delphi—

PBGC is barred from perfecting a lien under this provision. According to 

PBGC officials, although liens could have arisen under this provision on 

Delphi’s foreign controlled group members after the Delphi plans were 

terminated, they concluded that PBGC could maximize recoveries by 

achieving a settlement prior to termination, in part because they were 

concerned about the potential breakup of Delphi’s controlled group and 

the impact this would have on recoveries.

According to information from PBGC, in May 2009, PBGC, Delphi, GM 

and Treasury met to discuss the status of negotiations surrounding 

Delphi’s bankruptcy, including the pension plans. Treasury participated in 

those negotiations as the facilitator between GM and PBGC regarding 

Delphi pension issues.61According to a GM official’s court declaration, 

neither GM nor presumably any other potential purchaser was willing to 

purchase Delphi’s assets while they were subject to the threat of liens 

PBGC held on behalf of the underfunded Delphi plans. Therefore, GM’s 

obligations to Delphi were conditioned upon PBGC agreeing to remove 

these liens on Delphi’s assets. During the negotiations, GM recognized 

that it might be necessary for it to make a cash payment to the PBGC or 

assume some portion of Delphi’s unfunded pension liabilities. GM noted it 

would only make such a payment if necessary to help Delphi’s 

reorganization and the payment was clearly outweighed by the benefits 

GM would receive from Delphi’s reorganization. GM also noted that any 

contributions under an agreement with PBGC would be subject to 

Treasury’s consent if funds in a restricted escrow account, over which 

Treasury held approval rights, would be used for such contributions.62

 

6029 U.S.C. § 1368.

61Deposition of Treasury Official, No. 04-44481 (RDD) (S.D. N.Y. July 21, 2009). 

62Of the $30.1 billion that Treasury provided to GM at its bankruptcy filing, $16.4 billion 

was held in escrow to be accessed by GM on an as-needed basis with the consent of 

Treasury. In October 2009, Treasury approved GM’s request for approximately $3 billion 

from this account for transactions related to the resolution of the Delphi bankruptcy.

According to GM, this amount included the $70 million payment that GM made as part of 

its agreement with PBGC.

PBGC Negotiated the 

Value of Its Claims with 

Delphi and GM
 

Page 24 GAO-12-168 Delphi Pension Plans 

PBGC and Delphi reached an agreement on July 21, 2009, and PBGC 

announced it was terminating Delphi’s plans the following day. PBGC 

received a membership interest in new Delphi, which gave it rights to 

some of the initial profit distributions from post-bankruptcy Delphi. PBGC 

actuaries valued the interest at $500 to $600 million. GM also paid PBGC 

$70 million in cash. In exchange, PBGC released $205 million in liens on 

Delphi’s foreign assets (which PBGC considered worth substantial 

negotiating leverage in maximizing recoveries) and released Delphi 

controlled group members from any potential future PBGC claim that 

might arise against them under any circumstances. PBGC also settled 

with Delphi and received a $3 billion general unsecured claim in Delphi’s 

bankruptcy in exchange for releasing all of its other claims in the case 

(see fig. 2).

In March 2011, PBGC redeemed its membership interest from new Delphi 

for $594 million. Soon after, in April 2011, PBGC sold its remaining $3 

billion general unsecured claim against old Delphi to Credit Suisse Loan 

Funding, LLC for $53 million—roughly 2 cents on the dollar. Together, 

PBGC’s recoveries of Delphi Corporation assets totaled approximately 

$717 million—or an estimated $600 million to $650 million when 

discounted to its value as of the date of plan termination, as required 

under ERISA.63

 

6329 U.S.C. § 1362(b)(1).

Based on these values, recovery ratios for Delphi’s hourly 

and salaried plans are estimated to ultimately be just over 6 percent.
 

Page 25 GAO-12-168 Delphi Pension Plans 

Figure 2: PBGC Asset Recoveries in Delphi’s Bankruptcy

The recovery ratios in Delphi’s case are comparable to those we found in 

the nine other companies on PBGC’s top-10 list of largest claims, although 

the circumstances surrounding each recovery process are unique. As it did 

in Delphi’s case, PBGC had claims on non-debtor corporate subsidiaries in 

recovery efforts against three other large terminations we examined: 

Weirton Steel, Bethlehem Steel, and National Steel. Also, as it did with 

Delphi, PBGC entered into a negotiated settlement agreement with eight of 

the other nine companies on PBGC’s top-10 list of largest claims.64

We reviewed documents for the 29 plans across these nine firms, and 

found that the recovery ratios ranged from 0 percent to 38.5 percent. 

 

64The companies we reviewed, 5 airlines and 4 steel companies and Delphi, are singleemployer pension plan firms with the 10 highest claims on PBGC from 1975 through 2010. 

Among them they sponsored a total of 35 DB plans. See appendix III for a summary of 

PBGC recoveries for terminated plans of these firms. In addition to these terminations we 

also reviewed the terminations of the Collins & Aikman Corporation and Hayes Lemmerz 

International, Inc., because as it did in Delphi’s case, PBGC filed liens on foreign 

subsidiaries of those companies.
 

Page 26 GAO-12-168 Delphi Pension Plans 

Recovery ratios appeared to vary by industry for the other nine 

companies, all of which are airlines or steel companies. Of the 13

terminated steel plans we reviewed, 9 had PBGC recovery ratios less 

than 3 percent, and of the 11 large airline plans we reviewed, 8 had 

recovery ratios over 8 percent. We also found that PBGC generally 

achieved higher recovery ratios for plans of companies that were in a 

position to emerge from bankruptcy after their plans’ termination than 

those of companies positioned to sell their assets or liquidate.

We also sought to compare PBGC’s recovery efforts against Delphi with 

other terminations involving companies with foreign assets. In response 

to our request for cases involving foreign liens, PBGC did not identify any 

of the firms involving their 10 largest claims,65 but instead provided two 

other case examples. In one case, Hayes Lemmerz International, Inc., 

PBGC entered into a settlement (along with the other creditors) for claims 

on the company’s foreign subsidiaries to recover funds on behalf of the 

company’s pension plan. PBGC’s claims in this case total $113.1 million, 

and expected recoveries total $21.7 million, about 19 cents per dollar 

claimed. In the other case, Collins & Aikman Corporation, the company’s 

Canadian and Mexican subsidiaries represented a potentially large 

portion of the net worth in the controlled group. As in Delphi’s case, 

PBGC terminated the Collins & Aikman’s pension plan when it expected 

that these foreign assets would leave the controlled group and reduce 

PBGC recoveries. PBGC’s claims in this case total $225.2 million, and 

recoveries total $8.7 million, a recovery ratio of less than 4 percent.66

A fraction of PBGC’s $600 million to $650 million in recoveries will go to 

increase participant benefits beyond the level already guaranteed by 

PBGC, with the rest offsetting PBGC’s payment of unfunded guaranteed 

benefits. Recoveries of due and unpaid employer contributions are 

allocated back to the pension plans to which they are owed. Based on the 

liens for missed contributions to the Delphi plans, PBGC will allocate 

 

65One of the companies on the top-10 list, Delta Airlines, did have foreign subsidiaries in 

its controlled group and not in bankruptcy, but according to PBGC officials, these 

subsidiaries were relatively small and could not provide PBGC substantial recoveries. 

Therefore, PBGC did not file foreign liens in that case.

66As others have noted, PBGC’s authority to recover on liens abroad is not without some 

constraints. Allan E. Reznick and A. Owen Glist, Pension Benefit Guaranty Corp.—

Controlled Group Claims Abroad, 235 N.Y. L.J. No. 33 (2006).

Recoveries Will Result in 

Minimal Benefit Increases 

beyond Guaranteed 

Benefit Amounts
 

Page 27 GAO-12-168 Delphi Pension Plans 

$195.9 million of its recoveries to the salaried plan, and $9.2 million to the 

smaller plans from its recoveries (see fig. 3).

Figure 3: Distribution of Asset Recoveries by PBGC in Delphi’s Bankruptcy

a

Plan assets distributed to unfunded guaranteed and nonguaranteed benefits, but under different 

rules than asset recoveries. 

The remaining recoveries, estimated to be between $395 and $445 

million, are allocated among the plans proportionally according to each 

plan’s percentage of total remaining unfunded benefit liabilities.67 The 

money allocated to each plan is then split between PBGC (to offset its 

cost of paying unfunded guaranteed benefits) and participants (to pay a 

portion of unfunded benefits beyond ERISA’s guarantee limits). For plans 

with more than $20 million in unfunded benefit liabilities, as in the case of 

Delphi’s hourly and salaried plans, the percentage of participants’ 

nonguaranteed benefits PBGC pays depends on the percentage of the 

plans’ unfunded benefit liability PBGC is able to recover.68

 

6729 U.S.C. §§ 1322(c) and 1344(f).

Remaining 

6829 U.S.C. § 1344(f)(2)(C). For plans with less than $20 million in unfunded benefit 

liabilities, the split between PBGC and participant benefits is determined by PBGC’s small 

plan recovery ratio, an average of PBGC’s recoveries over a 5-year period (29 U.S.C. 

1344(f)(2)(A)). In 2009, this ratio was set at 3.85 percent. 
 

Page 28 GAO-12-168 Delphi Pension Plans 

recoveries go to offset PBGC’s loss for paying guaranteed benefits. With 

recoveries of about 6 percent of unfunded liabilities for both Delphi’s 

hourly and salaried plans, PBGC would pay about 6 percent of all 

participant unfunded nonguaranteed plan benefits, which are those 

benefits funded neither by plan assets nor guaranteed by PBGC. PBGC 

officials said it is too early in the benefit determination process to develop 

an accurate estimate of total unfunded, non-guaranteed benefits, but at 

this point, PBGC expects that recoveries will slightly increase benefits for 

some participants across Delphi’s plans.

The benefits provided by PBGC must comply with the limits on guaranteed 

benefits under ERISA, and as a result, the amount guaranteed and paid by 

PBGC to some Delphi retirees will be less than the amounts promised by 

Delphi. However, some Delphi hourly plan participants avoided these 

reductions because they were transferred into GM’s plan prior to PBGC’s 

termination of the Delphi plan. Some of the other hourly plan participants 

who will receive less from PBGC than the amount promised by Delphi will 

have their losses covered by GM because of top-up agreements originally 

negotiated when Delphi was spun off from GM. These participants will 

receive additional payments from GM resulting in their receiving, in total, 

their full promised benefits. But most Delphi employees are not covered by 

these top-up agreements—including about 40 percent of the participants in 

the hourly plan, and all the participants in the salaried and other four 

smaller plans. PBGC’s data showed that, as a result of the ERISA limits, 

PBGC has had to reduce benefits for just under half of salaried and hourly 

plan participants already retired and receiving pension payments, 

according to information collected by DSRA.

As of June 2011, after reviewing the benefits promised to and being paid 

to the vast majority of Delphi hourly and salaried participants already 

retired, PBGC data indicate that just under half required reductions in 

their estimated benefit in order to comply with ERISA limits (see table 

3).69

 

69When PBGC becomes trustee of a terminated plan, it pays participants already retired 

and receiving pension payments estimated benefits until it can determine the correct 

benefits participants should receive under ERISA. 

According to the data, 48 percent of hourly retirees and 45 percent of 

the salaried retirees had their estimated benefits reduced because of 

Many Delphi Retirees 

Are Subject to Benefit 

Reductions and Only 

Certain Hourly 

Retirees Are 

Protected by Union 

Agreements with GM

ERISA Limits Result in 

Reductions in Benefits for 

Many Retirees
 

Page 29 GAO-12-168 Delphi Pension Plans 

guarantee limits.70 Like those affected by other large terminations, Delphi 

participants who had retired early or had accrued higher benefits were 

likely to have their benefits reduced due to ERISA limits. For example, 

retirees in both plans frequently had benefit reductions because of 

ERISA’s accrued-at-normal limit, which can eliminate or substantially 

reduce any early retirement supplemental benefits.71 Only salaried 

retirees had a high proportion of retirees receiving reductions because of 

ERISA’s maximum limit, with 26 percent of them exceeding this limit 

compared with 2 percent of hourly retirees.72

Table 3: Number and Percentage of Delphi Retirees Subject to Reductions in Estimated Benefits Due to ERISA Limits (as of 

June 1, 2011)

Even after applying the 

ERISA limits, PBGC expects to pay about $6 billion of the $7.2 billion in 

unfunded benefits promised to Delphi participants, as these benefits fall 

under the limits and thus are guaranteed.

Delphi plana Number of participants

Number of participants 

with benefits reviewed by 

PBGC as of June 1, 2011b

Number with 

reductions in 

benefits

Percent reviewed 

with reductionsb Percent reviewed 

with no reductionsb

Hourly plan 47,176 28,051 13,368 48 52

Salaried plan 20,203 8,273 3,714 45 55

Source: GAO analysis of PBGC data.

a

In addition to the hourly and salaried plans, Delphi also has four other small plans. (See appendix II 

for estimated benefit reductions for all Delphi plans.) 

b

According to PBGC officials, as of June 2011, they had not yet reviewed the benefit amounts for 

about 2,000 of the 30,000 hourly plan participants already receiving payment, but had reviewed the 

benefit amounts for all other salaried plan participants already receiving payments. These rates are 

also subject to change as PBGC determines the impact of plan asset recoveries on retirees’ benefits 

and as more workers retire and receive estimated reductions and final benefit determinations over the 

next year or more. 

 

70The proportion of Delphi retirees who have had their benefits reduced by each of 

ERISA’s benefit limits as of June 2011 is provided in appendix II.

71Under ERISA, the accrued-at-normal limit permits little if any early retirement or supplemental 

benefits to be paid. It provides for benefits to be paid at the plan’s normal retirement age, which 

is 65 years old, as a straight-life annuity (that is, a periodic payment for the life of the retiree, 

with no additional payments to survivors). 29 C.F.R. § 4022.21 (2011).

72ERISA’s maximum limit guarantees payment of benefits up to a federal statutory maximum 

(29 U.S.C. § 1322(b)(3)), adjusted annually, based on the year the plan terminates. 29 

C.F.R. § 4022.23 (2011). When Delphi’s plans terminated in 2009, the maximum limit was 

$54,000 per year for a person retiring at age 65 and with no survivor benefit. The maximum 

is actuarially lower for those retiring under age 65 or with a survivor benefit.
 

Page 30 GAO-12-168 Delphi Pension Plans 

Based on PBGC’s reviews as of June 2011, a higher proportion of Delphi 

retirees have been subject to the guarantee limits compared with retirees 

of most other large plans terminated and trusteed by PBGC. While PBGC 

does not systematically track the number of participants affected by 

guaranteed benefit limits, a study it conducted in 2008 using a sample of 

large plans showed that ERISA benefit limits resulted in 16 percent of 

participants receiving reductions. It also found that the steel and airline 

plans, which tend to allow early retirement and have generous benefits, 

had a higher percentage of participants experiencing reductions, at 21 

percent for steel plans and 22 percent for airline plans. Although certain 

plans for pilots have had 60 percent of participants receiving reductions, 

Delphi’s current rates of 45 percent of salaried plan participants and 48 

percent of hourly plan participants are higher than most. However, over 

time, the proportion of Delphi retirees with benefit reductions is likely to 

decline. According to PBGC, many participants from the salaried plan 

who were not eligible to retire as of the termination date were not entitled 

under the plan to benefit supplements or benefit payments larger than 

ERISA’s maximum limit. Also, some workers eligible for these benefits 

may choose to wait longer to retire to try to avoid or mitigate the amount 

of benefit reductions.

Recoveries can also mitigate possible benefit losses that have not been 

guaranteed by PBGC. As PBGC is still in the early stages of valuing the 

plan, it has not fully determined the extent to which recoveries will impact 

participants’ unfunded nonguaranteed benefits. According to a PBGC 

official, preliminary estimates suggest that PBGC recoveries allocated to 

Delphi participants’ benefits will lessen the extent of benefit reductions for 

some participants with benefits at the top of the statutory allocation 

priority category 3—that is, those who were retired (or were eligible to 

retire) at least 3 years prior to the date of plan termination for the salaried 

plan.73

 

73For terminated underfunded plans, ERISA establishes a detailed process for allocating 

plan assets and PBGC recoveries to participants’ benefits based on six priority categories. 

For further details, see appendix III. As discussed in the prior section, the recoveries 

allocated to participants for unfunded and nonguaranteed benefits do not include any of 

the recoveries for “due and unpaid employer contributions,” which are allocated back to 

the pension plans to which they were owed and allocated with plan assets rather than 

recoveries. 

Most of the other large plans we reviewed had sufficient assets 

and recoveries to partially or fully fund this priority category. (See app. III 

for the allocation of plan assets and recoveries to the priority categories 

for other large terminations we reviewed.)
 

Page 31 GAO-12-168 Delphi Pension Plans 

As for the magnitude of benefit reductions, PBGC could not provide 

summary information on the range of retirees’ losses. However, according 

to DSRA officials, information they collected indicates that salaried 

retirees under 65 years of age were at risk for “significant pension 

reductions.” DSRA requested information on losses from approximately 

4,000 salaried retirees who may have received reductions in benefits as 

of the first quarter of 2010. The 1,703 who responded (or about 8 percent 

of all salaried plan participants) reported losses in benefits ranging from 5 

percent to 60 percent, with more than 90 percent having losses of 10 

percent to 40 percent.74 Our review of a small judgmental sample of 

reductions for seven salaried retirees showed a range of pension losses 

from 12 percent to 40 percent. The salaried retiree who had a 12 percent 

drop in pension benefits lost $349 per month (a decline from $2,944.25 to 

$2,595.15 per month) due to the loss of a substantial portion of his early 

retirement supplemental benefit. The salaried retiree who had a 40 

percent drop in pension benefits lost $1,490.67 per month (a decline from 

$3,732.63 to $2,241.96 per month) due to the loss of benefits in excess of 

the maximum limit based on his age at retirement and his annuity that 

provided survivor benefits.

Agreements negotiated between GM and various Delphi unions have 

protected certain participants in Delphi’s hourly plan from benefit loss due 

to termination of their underfunded plan. These agreements include the 

arrangement that resulted in the transfer of 14,413 (about 22 percent) of 

Delphi’s hourly plan participants back to GM’s hourly plan in September 

2008, as well as the provision of pension top-ups covering reductions in 

benefits resulting from the application of ERISA limits.75

In 2007 and 2008, as part of Delphi’s bankruptcy and restructuring plan at 

the time, GM and Delphi negotiated agreements to transfer the Delphi 

hourly plan participants’ pensions back into GM’s hourly plan in two 

But most Delphi 

employees are not protected by these agreements—including a 

substantial portion of hourly plan participants and all the participants in 

the salaried plan and other smaller Delphi pension plans.

 

74We could not verify the accuracy of information collected by DSRA nor could we perform 

any statistical analyses to determine the significance of the results.

75For a summary and timeline of events surrounding the creation of the union agreements 

and the termination of Delphi plans, see GAO-11-373R. 

Agreements between GM 

and Unions Protect Certain 

Hourly Retirees from 

Benefit Loss
 

Page 32 GAO-12-168 Delphi Pension Plans 

installments.76 The unions participated in developing the criteria to select 

the pensions to be transferred in the first installment, which took place in 

September 2008.77 In this transfer, the pensions of about 24 percent 

(14,413 of 60,905) of Delphi’s hourly plan participants were transferred to 

GM’s hourly plan, which assumed the associated $2.1 billion in net 

liabilities for these pensions.78

Furthermore, top-up agreements covering certain hourly workers will 

protect these workers, but not others, from potential losses due to the 

benefit limits in ERISA. In June and August of 2007, GM agreed with 

UAW, IUE, and USWA to extend the top-up agreements originally 

negotiated in 1999 after Delphi’s spinoff from GM. In November 2008, 

Delphi froze its hourly plan, ceasing the accrual of additional benefits 

under the plan and triggering the top-up agreement for covered 

participants.

As a result, those Delphi plan participants 

whose pensions were transferred were no longer part of Delphi’s plan and 

were therefore protected from any benefit loss resulting from Delphi’s 

subsequent plan termination.

79

 

76On September 6, 2007, GM and Delphi signed the first Global Settlement Agreement 

that laid out their plans to transfer pensions from Delphi’s hourly plan to GM’s hourly plan. 

The plans for the second pension transfer are included in Section 2.03 of the Global 

Settlement Agreement between Delphi and GM, dated September 12, 2008. 

GM negotiated and maintained the top-up agreements with 

the UAW during its bankruptcy and restructuring, as did new GM with the 

IUE and USWA in September 2009. As a result, certain covered hourly 

employees will receive their full promised benefits despite the plan freeze 

and subsequent termination, even if their benefits exceed the guaranteed 

77The criteria and order of Delphi hourly pensions to be transferred was based on 2007 

negotiations between the Unions, Delphi, and GM and contained in paragraph 22(b) of the 

Term Sheet (Attachment B) to the UAW-Delphi-GM Memorandum of Understanding – 

Delphi Restructuring, dated June 22, 2007 (and comparable agreements for the IUE-CWA 

and USWA). The UAW-Delphi-GM Implementation Agreement, dated September 26, 2008 

(and comparable agreements for the IUE-CWA and USWA), supplemented this 

information to include additional criteria.

78The second installment never took place because Delphi could not meet the agreed 

upon conditions for the transfer. For more information about the Delphi reorganization 

efforts, see GAO-11-373R. 

79In September 2008, Delphi also froze its salaried plan and three smaller qualified DB 

plans to limit all future benefit accruals. For more information on types of freezes and their 

effects, see: GAO, Defined Benefit Pensions: Plan Freezes Affect Millions of Participants 

and May Pose Retirement Income Challenges, GAO-08-817 (Washington, D.C.: Jul. 21, 

2008). 
 

Page 33 GAO-12-168 Delphi Pension Plans 

benefit limits under ERISA. According to data provided by GM, about 60 

percent of the participants in Delphi’s hourly plan as of the date of plan 

termination are potentially covered by GM top-ups if there is any 

reductions in their promised benefits. As of June 2011, GM reported that 

it had paid $221.9 million to 12,638 Delphi retirees and dependents under 

these top-up agreements.

As indicated in figure 4, however, most Delphi employees are not covered 

by these top-up agreements. No participants in Delphi’s salaried plan or 

other four smaller plans are covered. In addition, about 40 percent of 

Delphi hourly plan participants are also not covered, including anyone 

who never was qualified because they were not members of the unions 

securing these agreements, were not members of the GM hourly plan 

prior to the spinoff, or lost their qualification because they had a break in 

their employment or otherwise lost their seniority. Participants who would 

otherwise be covered, but do not meet the retirement criteria of the plan, 

also will not be provided top-ups, according to GM officials.80

 

80Pension plans include retirement eligibility criteria that must be met to receive normal or 

early retirement benefits. For instance, a Delphi hourly plan participant must generally be 

of certain age and have sufficient number of credited years of service to retire. For 

example, to get a normal retirement, a participant needs to be 65 years old. To get an 

early retirement, a participant generally needs to be at least 60 years old with 10 years of 

service, have 30 years of credited service, or meet the rule-of-85 (i.e., be at least 55 years 

of age, but not age 60, and have the total of his an age and years of credited service total 

at least 85). 
 

Page 34 GAO-12-168 Delphi Pension Plans 

Figure 4: Number of Delphi Employees Covered by GM Top-Ups, by Plan 

Note: Delphi hourly plan participants who were not protected by top-up agreements include all those 

who were not members affiliated with UAW, IUE, or USWA and were not previously employed by GM 

prior to the Delphi spin-off. 

PBGC will reduce the benefits of all participants in the terminated pension 

plans whose promised benefits exceed ERISA’s guaranteed benefit limits. 

Because of the GM top-up, certain hourly plan participants will have any 

pension benefit reduced because of statutory limits paid to them by GM. 

The combination of the GM top-ups and the 2008 partial plan transfer of 

Delphi’s hourly plan participants to GM have resulted in a much higher 

percentage of salaried plan participants ultimately facing benefit 

reductions than hourly plan participants. Based on the status of PBGC’s 

benefit reviews as of June 2011, 18 percent of the salaried plan 

participants have had their benefits reduced, while only 1 percent of the 

hourly plan participants had reductions that will not be topped up by GM.81

(See fig. 5.) However, the percentage of hourly participants with 

reductions not topped up by GM is expected to rise over time, as more of 

this group have their benefits reviewed by PBGC. According to PBGC 

officials, no other underfunded pension plan terminated and trusteed by 

PBGC has had a top-up agreement with a parent company comparable to 

these agreements between Delphi and GM. 

 

81The 18 percent of salaried plan participants with benefit reductions and no top-ups 

represent 45 percent of the retirees with reductions. The 1 percent of hourly plan 

participants with reductions and no top-ups represent 5 percent of the hourly retirees 

reviewed by PBGC with reductions. 
 

Page 35 GAO-12-168 Delphi Pension Plans 

Figure 5: Status of Benefits for Participants from Delphi’s Hourly and Salaried Plans (as of June 2011) 

In the course of the Delphi bankruptcy and the termination of its pension 

plans, Delphi employees were notified by Delphi and subsequently by 

PBGC of certain facts, as required by law—namely, of Delphi’s intention 

to defer pension plan contributions and to subsequently freeze the plans, 

and of PBGC’s intention to terminate and trustee the plans, and 

subsequently the effects, when calculated, on individual employee 

pensions. Through their unions, hourly employees received additional 

information, while salaried employees had no formal representative 

through which to receive additional information until they formed DSRA. 

Both Delphi and 

PBGC Provided 

Delphi Employees 

with Information 
 

Page 36 GAO-12-168 Delphi Pension Plans 

Delphi notified both hourly and salaried employees in 2006 that it had 

failed to make the minimally-required contribution to their pension plans 

due at that time and that the plans were underfunded by $4.3 billion as of 

December 2004.82 Later in 2006, it also notified its employees, as 

required, that the company had requested a funding waiver for plan year 

2006 from the IRS.83 This notification also included legally required 

information such as a description of the extent to which the plan is 

funded. Similarly, in 2007, Delphi notified the hourly employees of another 

waiver request to defer hourly plan contributions for plan year 2007. 

Subsequently, as required, in October 2008, Delphi notified 

representatives of the unions, UAW, IUE, and USWA, that the hourly plan 

would be frozen as of the end of November 2008 and that participants 

would, consequently, cease accruing additional pension benefits.84 In 

addition, as required, in August of 2008, Delphi also notified salaried 

employees that their plan would be frozen as of the end of September. 

Prior to the termination, Delphi employees did not receive regular 

information from Delphi as to the actual funding status of their plans. 

Under a new federal requirement, such reporting would have been first 

required of Delphi by January 1, 2010—several months after PBGC had 

terminated and trusteed the plans.85 However, Delphi noted that it 

provided its employees with summary plan descriptions, as required.86

The example summary plan descriptions we obtained for the salaried and 

hourly plans included information about PBGC’s pension insurance 

program and how pension payments could be reduced if the plan 

terminates without enough money to pay all benefits, based on the 

guarantee limits in ERISA and PBGC regulations. 

 

82ERISA requires plan sponsors to notify employees when the sponsor requests a waiver 

from annual plan funding from the IRS (29 U.S.C. § 1082(c)(6)); and to notify employees 

and unions if the sponsor freezes the plan (29 U.S.C. § 1054(h)). 

83The Delphi hourly and salaried plan year was from the beginning of October to the end 

of September of the following calendar year. 

84The splinter unions, IBEW, IAM, and IUOE were also notified in October 2008 that their 

members’ benefits would be frozen as of the end of November 2008. 

85Pension Protection Act of 2006, Pub. L. No. 109-280, § 501(a), 120 Stat. 780, 936-39. 

(codified at 29 U.S.C. § 1021(f)) and Employee Benefits Security Administration, Field 

Assistance Bulletin No. 2009-01 at 2 (Feb. 10, 2009). 

8629 U.S.C. § 1022 and 29 C.F.R. § 2520.102-3(m)(1)-(3) (2011). 

Delphi Notified Pension 

Holders as Required and 

also Communicated with 

Employee Representatives 
 

Page 37 GAO-12-168 Delphi Pension Plans 

In a July 2009 PBGC press release, PBGC announced the Delphi 

employee pension plans were terminated and the underfunded status of 

the plans. Following termination, PBGC notified Delphi employees of its 

role as statutory trustee of the plans, as required by ERISA.87

As of October 2011, PBGC sent benefit determination letters, informing 

participants of their benefits, to about 10,600 hourly employees and to 

about 50 salaried employees. According to PBGC, letters to many 

salaried employees had been delayed due to coordination with several 

insurers contracted by Delphi to provide annuities.

Based on 

official Delphi notices to employees we reviewed, this press release from 

PBGC constituted the first time that employees were apprised of the fact 

that the plans were severely underfunded since the notice from Delphi in 

2006. Following termination in July, PBGC sent Delphi employees letters 

notifying them that if they were eligible and applied to PBGC to begin 

payments, it would begin paying estimated benefits. It also has a toll-free 

telephone number that allows any participant to call PBGC directly with 

questions. PBGC sent Delphi employees a welcome packet and a video 

describing PBGC’s role as trustee. The agency also spoke regularly with 

representatives of DSRA. PBGC met, as well, with union representatives 

of UAW, IUE, and USWA to answer their questions.

As representatives of hourly employees in collective bargaining over 

wages and benefits, the three major unions with whom we spoke—UAW, 

IUE, and USWA—said that they kept their members apprised of changes 

to their benefits and prior agreements, through briefings, letters, and 

through the process of ratification. In addition, their members were 

apprised by GM in January 2010 that the company would honor the topup agreements. On the other hand, Delphi’s salaried employees had no 

such union membership or agreement with GM, and received their 

information exclusively from Delphi until just before termination in 

February 2009, when they formed DSRA.

 

8729 U.S.C. § 1342(d)(2).

PBGC Communicated with 

Delphi Employees

Delphi Employees also 

Received Information 

through Their Employee 

Representatives
 

Page 38 GAO-12-168 Delphi Pension Plans 

The termination of Delphi’s pension plans culminated from a complicated 

and intertwined set of events involving Delphi, GM, various unions, and 

Treasury, as well as PBGC. That some participants will not get the full 

benefits promised to them by their employer is not unusual when 

companies go bankrupt and leave their plans with large unfunded 

liabilities. At the same time, the role that GM and Treasury played in the 

events leading up to termination caused the process to be unusual in 

several respects. Beginning with negotiations related to Delphi’s spin-off 

in 1999, GM—although no longer the sponsor of the Delphi plans—

agreed to top up the benefits of certain union workers should the Delphi 

hourly plan be frozen or terminated, and maintained these top-up 

agreements at various points over the next decade. In addition, after 

Delphi filed for bankruptcy, GM agreed to take back all or part of Delphi’s 

hourly plan under certain conditions, and actually took back the pensions 

of nearly a fourth of Delphi hourly plan’s participants in 2008. PBGC 

officials noted they have not seen these types of agreements in any other 

plan terminations to date. Then, with GM’s own financial condition 

deteriorating, Treasury’s role as a shareholder led some to question the 

role Treasury might also be playing with respect to GM’s decisions 

regarding Delphi and its pension plans. As we have reported previously, 

Treasury’s multiple roles in situations involving the auto industry and 

workers’ pensions may create potential tensions and challenges. On 

behalf of the U.S. taxpayer, Treasury has an interest in safeguarding 

taxpayer investment, while also—through the Secretary of the Treasury’s

role on PBGC’s board—protecting the financial viability of workers’ 

pension plans. Although Treasury has established policies to separate 

these interests, and various parties told us that Treasury did not play an 

active role in decisions regarding Delphi’s plans, potential tensions due to 

these multiple roles remain. In our prior work on the automakers’ pension 

plans, we concluded that the best way for Treasury to mitigate these 

tensions is through more open reporting to Congress and the public on its 

activities. In response to a previous recommendation, Treasury 

implemented a revised reporting policy, attempting to balance concerns 

about publicly disclosing proprietary information in a competitive market 

with the need for greater transparency. We believe that the most effective 

means of addressing concerns about Treasury’s different roles is for 

Treasury to continue to be as transparent as possible about its activities.

Concluding 

Observations
 

Page 39 GAO-12-168 Delphi Pension Plans 

We obtained written comments on a draft of this report from the 

Department of the Treasury (see appendix IV). Treasury’s comments 

generally agree with the findings and concluding observations in our report, 

emphasizing that Treasury did not authorize, approve, or consent to the 

termination of the Delphi salaried plan, and that PBGC independently 

decided - not the PBGC board or Treasury - to terminate the Delphi 

pensions. We continue to believe that Treasury’s multiple roles in situations 

involving the auto industry and workers’ pensions may create the 

appearance of potential tensions and challenges, and that the most 

effective means of addressing these concerns is for Treasury to continue to 

be as transparent as possible about its activities.

In addition, Treasury, PBGC, and the Department of Labor, all provided 

technical comments that we incorporated as appropriate. We also 

provided certain segments of the draft to Delphi, GM, DSRA, UAW, IUE, 

and USWA. We received technical comments on these segments from 

GM and USWA, and have incorporated these where appropriate, as well.

We are sending copies of this report to the appropriate congressional 

committees, the Director of PBGC, the Secretary of Labor, the Secretary 

of Treasury, the Secretary of Commerce, and other interested parties. 

The report also is available at no charge on GAO’s Web site at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

Barbara Bovbjerg at (202) 512-7215 or bovbjergb@gao.gov. Contact 

points for our Offices of Congressional Relations and Public Affairs may 

be found on the last page of this report. Key contributors to this report are 

listed in appendix V.

Barbara D. Bovbjerg

Managing Director

Education, Workforce,

 and Income Security Issues

Agency Comments 

and Our Evaluation
 

Page 40 GAO-12-168 Delphi Pension Plans 

List of Requesters

The Honorable John A. Boehner

Speaker of the House of Representatives

The Honorable Roger F. Wicker

United States Senate

The Honorable Spencer T. Bachus

Chairman, Committee on Financial Services

House of Representatives

The Honorable Mike Pence

The Honorable Michael R. Turner

House of Representatives
Appendix I: Single-Employer Firms with the 

Largest PBGC Claims for Terminated Plans 

(1975 through 2011) 

Page 41 GAO-12-168 Delphi Pension Plans 

Top-10 firms

Number of 

plans

Fiscal year(s) 

of plan

termination(s) Claims (by firm)

Vested 

participants

Average 

claim per 

vested 

participant

Percent of 

total 

claims

1. United Airlines 4 2005 $7,441,450,992 123,957 $60,033 16.3

2. Delphi 6 2009 6,108,491,551 69,042 88,475 13.4 

3. Bethlehem Steel 1 2003 3,654,380,116 91,312 40,021 8.0

4. US Airways 4 2003, 2005 2,751,534,173 55,770 49,337 6.0

5. LTV Steela 6 2002, 2003, 2004 2,134,985,884 83,094 25,694 4.7

6. Delta Air Lines 1 2006 1,641,083,525 13,291 123,473 3.6

7. National Steel 7 2003 1,275,628,286 33,737 37,811 2.8

8. Pan American Air 3 1991, 1992 841,082,434 31,999 26,285 1.8

9. Trans World Airlines 2 2001 668,377,106 32,263 20,717 1.5

10. Weirton Steel 1 2004 640,480,970 9,410 68,064 1.4

Top-10 total 35 $27,157,495,038 543,875 $49,933 59.6

All other total 4,257 $18,390,580,981 935,125 $19,666 40.4

Total 4,292 $45,548,076,019 1,479,000 $30,797 100.0

Source: PBGC, Pension Insurance Data Book 2009 and 2011 PBGC Annual Report. 

Note: Cumulative plans include 10 multiemployer plans trusteed by PBGC before 1980. PBGC has 

not trusteed any multiemployer plans since 1980. The Multiemployer Pension Plan Amendments Act 

of 1980 changed PBGC’s responsibility from trusteeship of troubled multiemployer plans to providing 

financial assistance (loans) to insolvent plans. Pub. L. No. 96-364, 94 Stat. 1208. 

a

Does not include 1986 termination of a Republic Steel plan sponsored by LTV.

Appendix I: Single-Employer Firms with the 

Largest PBGC Claims for Terminated Plans 

(1975 through 2011)
Appendix II: Number and Percentage Delphi Retirees with Reductions in ERISA Benefits Due to Guaranteed Benefit Limits (as of June 

1, 2011) 

Page 42 GAO-12-168 Delphi Pension Plans 

Accrued-at-normal limitc

Maximum limitd Phase-in limite

Number

Percentage 

reduced Number 

Percentage 

Plan reduced

Total number of 

participants (as 

of termination)

Number of 

participants reviewed 

by PBGC as of 

June 2011

Number with 

reduction(s) in 

PBGC estimated 

benefita

Percentage 

reviewed with 

reductionb Number

Percentage 

reduced

Delphi Hourly Planf 11,619 41.42 472 1.68 352 1.25 

Delphi Salaried Plan 20,203 8,273 3,714 45 2,323 28.08 2,174 26.28 0 0 

Packard-Hughes Interconnect 

Non-Bargaining Retirement 

Plan (PHI_NBU) 

1,383 240 30 13 3 10.00 1 3.33 26 86.67 

Packard-Hughes Interconnect 

Bargaining Retirement Plan 

(PHI_BU) 

165 80 62 78 0 0 1 1.61 61 98.39 

ASEC Manufacturing 

Retirement Program (ASEC) 

533 126 6 5 0 0 4 66.67 0 0 

Delphi Mechatronic Systems 

Retirement Program (DMS) 

148 12 3 25 3 100.00 1 33.33 0 0 

Source: GAO analysis of PBGC data.

a

Retirees may have more than one type of reduction; therefore, the number of retirees with reductions and the number of reductions may not be the same for each plan. 

b

These rates are subject to change as more workers retire and receive early estimated reductions and final benefit determination letters from PBGC over the next year or more. 

c

Accrued-at-normal limit: The monthly guaranteed benefit cannot be greater than the monthly benefit provided as a straight-life annuity (that is, a periodic payment for the life of the retiree, with no 

additional payments to survivors) available at the plan’s normal retirement age. The portion of any combined early retirement benefit and supplemental benefit that exceeds the normal retirement 

age straight life annuity is not guaranteed under this provision. 29 C.F.R. § 4022.21 (2011). 

d

Maximum limit: The guaranteed benefit cannot exceed the statutory maximum, adjusted annually, at the time the plan terminates. In 2009, the maximum was $54,000 per year for a person who 

begins to receive benefits from PBGC at age 65 and with no survivor benefit (that is, a single-life annuity). The maximum is lower for those retiring under age 65 or with a survivor benefit. 29 U.S.C. 

§ 1322(b)(3); 29 C.F.R. § 4022.23 (2011). 

e

Phase-in limit: The guaranteed benefit cannot include any benefit increase that was made within 1 year of the date of the plan termination. For benefit improvements that became effective more 

than 1 year but less than 5 years prior to the plan’s termination, the guaranteed amount is the larger of 20 percent of the benefit increase or $20 per month of the increase for each full year the 

increase was in effect. 29 U.S.C. § 1322(b)(1) and (7); 29 C.F.R. § 4022.25 (2011). 

f

PBGC also found that 1,567 hourly retirees should have their benefits reduced because it determined that they were not eligible for the “mutually satisfactory retirement,” which is a type of early 

retirement under the Hourly Plan. 

g

As of June 2011, PBGC still had about 2,000 of the 30,000 Hourly Plan retirees awaiting review.

Appendix II: Number and Percentage Delphi Retirees with 

Reductions in ERISA Benefits Due to Guaranteed Benefit 

Limits (as of June 1, 2011)
Appendix III Allocation of Plan Assets and 

Recoveries to Unfunded Nonguaranteed 

Benefits

Page 43 GAO-12-168 Delphi Pension Plans 

Upon the termination of a single-employer plan, plan assets are identified, 

valued, and then allocated to participant benefits, in accordance with the 

requirement of section 4044 of ERISA. Codified at 29 U.S.C. § 1344. In 

addition to plan assets, a portion of monies from company assets that 

PBGC recovers for unfunded benefit liabilities are allocated to participant 

benefits, in accordance with section 4022(c) of ERISA.29 U.S.C. 

§ 1322(c).

Plan assets available to pay for benefits under the plan are allocated to 

participant benefits according to six priority categories, as described in 

table 4. Assets are allocated to each priority category in succession, 

beginning with priority category 1. If the plan has sufficient assets to pay 

for all benefits in a priority category, the remaining assets are allocated to 

the next lower priority category. This process is repeated until all benefits 

in priority categories 1 through 6 have been provided or until all available 

plan assets have been allocated. Most private sector defined benefit 

plans do not require or allow participant contributions, so there are rarely 

any benefits in priority categories 1 and 2. Thus, in most trusteed plans, 

asset allocation begins with the benefits in priority category 3, that is, the 

benefits of those retired or eligible to retire 3 years before the plan 

terminated. However, it should be noted that assets are allocated based 

on retirement eligibility, not retirement status, and that many participants 

have benefits in more than one category. Table 5 provides the allocation 

of plan assets and recoveries to priority categories among plans that had 

5,000 or more participants for the 10 firms with the largest claims.

Appendix III Allocation of Plan Assets and 

Recoveries to Unfunded Nonguaranteed 

Benefits 
Appendix III Allocation of Plan Assets and 

Recoveries to Unfunded Nonguaranteed 

Benefits

Page 44 GAO-12-168 Delphi Pension Plans 

Table 4: Allocation Priority Categories (PC)

Priority 

Category Definition

PC-1 Accrued benefits derived from voluntary employee contributions. 

(According to PBGC, such benefits are “extremely rare” among private 

sector defined benefit plans.)

PC-2 Accrued benefits derived from mandatory employee contributions. 

(According to PBGC, such benefits are “quite uncommon” among private 

sector defined benefit plans.)

PC-3 Annuity benefits that have been in pay status for at least 3 years before 

the plan’s termination date, or could have been in pay status for at least 3 

years before the plan’s termination date had the participant chosen to 

retire at his or her earliest possible retirement date; however, benefits 

subject to the phase-in limitation (that is, benefit increases made within the 

last 5 years) are excluded. These benefits can be either guaranteed or 

nonguaranteed.

PC-4 Other guaranteed benefits and certain nonguaranteed benefits. The 

nonguaranteed benefits are those that are subject to the aggregate 

benefits limitation for participants in more than one plan that has been 

terminated with insufficient funds or are subject to special provisions 

applicable to substantial owners (that is, those owning more than 10 

percent of the company).

PC-5 Other vested nonguaranteed benefits that a participant is entitled to under 

the plan; however, benefits that result solely due to the termination of the 

plan—which are deemed “forfeitable”—are excluded.

PC-6 All other benefits under the plan. This category includes nonvested 

benefits and “grow-in” benefits, which are benefits that are provided in 

some situations where the company continues to operate after the plan is 

terminated.

Source: PBGC.
Appendix III Allocation of Plan Assets and Recoveries to Unfunded 

Nonguaranteed Benefits Page 45 GAO-12-168 Delph

Table 5: Comparison of Allocation of Plan Assets and Recoveries among Plans of Firms with 10 Largest Claims 

Firm/ plansa 

Present valueb (millions of dollars) 

Recovery 

ratio 

(percent)e

Allocations, by priority catego

Plan 

assets 

Unfunded benefit liabilities Percent of liabilities funded by assets 

Percent of unf

fun

Unfunded 

guaranteed 

benefitsc

Unfunded 

nonguaranteed 

benefits Totald PC3 PC4g PC5 PC6 PC3 

United Airlines Ground Employees plan 

1,309 1,978 796 2,774 12.88 97 0 0 0 100 

calcu

Management, administrative and public contact plan 

1,651 1,644 670 2,313 12.75 100 1 0 0 Not 

applicableh

Flight attendant plan 

1,427 1,644 256 1,901 13.23 69 0 0 0 100 

calcu

Pilots plan 2,846 1,376 1,381 2,757 12.98 81 0 0 0 56 Delphi (based on early estimates, calculations not yet finalized)Hourly plan 3,700 4,000 400 4,400 6.3 (allocations not yet determined) (allocatSalaried plan 2,400 2,200 400 2,600 6.3 (allocations not yet determined) (allocatBethlehem Steel Bethlehem Steel plan 

3,533 3,693 835 4,529 1.11 60 0 0 0 5 

US Airways Plan for pilots 1,193 552 1,692 2,244 0.00 100 Not 

calculated 

0 0 Not 

applicableh

calcu

Employees of IAM & AWi

560 749 24 774 8.27 77 0 0 0 93 

calcu

Flight attendants plan 

420 647 36 683 0.00 100 Not 

calculated 

0 0 Not 

applicableh

calcu

Certain employees plan 

895 685 16 701 4.39 100 7 0 0 Not 

applicableh 

calcu
Appendix III Allocation of Plan Assets and Recoveries to Unfunded 

Nonguaranteed Benefits Page 46 GAO-12-168 Delph

Firm/ plansa 

Present valueb (millions of dollars) 

Recovery 

ratio 

(percent)e

Allocations, by priority catego

Plan 

assets 

Unfunded benefit liabilities Percent of liabilities funded by assets 

Percent of unf

fun

Unfunded 

guaranteed 

benefitsc

Unfunded 

nonguaranteed 

benefits Totald PC3 PC4g PC5 PC6 PC3 

LTV Steel Hourly plan 1,697 1,681 672 2,353 1.97 66 0 0 0 100 

calcu

Salary plan 384 302 66 367 2.12 65 0 0 0 100 

calcu

Delta Air Lines Pilots plan 1,985 799 1,769 2,568 38.51 93 0 0 0 100 

calcu

National Steel Hourly plan 482 471 149 620 0 77 0 0 0 0 Weirton retirement program 

313 190 1 192 7.86 73 0 0 0 0 

calcu

Corporation retirement program 

303 291 73 364 0. 69 0 0 0 0 

Pan American World Airways Cooperative retirement income plan 

301 703 13 715 12.01 52 0 0 0 32 

Trans World Airlines Plan for employees 

736 460 4 464 4.94 100 Not 

calculated 

0 0 Not 

applicableh

calcu

Weirton Steel Retirement plan 540 637 205 842 0 71 0 0 0 0 

Source: GAO analysis of PBGC data aOf the 35 plans associated with the 10 largest claims, this table includes the 20 plans with 5,000 or more participants. Of the 15 remaining plans (includin

had unfunded nonguaranteed benefits that exceeded $20 million and the participants' portion of recoveries should be allocated using each plan's actual r

nonguaranteed benefits of less than $20 million and the participants' portion of recoveries should be allocated using the Small Plan Average Recovery Ra

information on allocation of recoveries. 
Appendix III Allocation of Plan Assets and Recoveries to Unfunded 

Nonguaranteed Benefits

Page 47 GAO-12-168 Delphi Pension Plans 

b

The present value is the actuarial value of benefits calculated as of the date of plan termination. 

c

The ERISA guaranteed benefits are equal to the plan assets and the unfunded guaranteed benefits. 

d

The total unfunded benefit liabilities are equal to the unfunded guaranteed benefits and the unfunded nonguaranteed benefits. This total may be slightly higher or lower than the sum of these 

preceding columns due to rounding. 

e

For plans with unfunded nonguaranteed benefits exceeding $20 million, the recovery ratio is the actual recovered amount (under section 4022(c) of ERISA) divided by the unfunded 

nonguaranteed benefits. In other cases, the ratio is an average of PBGC's recoveries over a 5-year period.

f

In most cases, plans had no participants in either the PC1 or PC2 categories, therefore, we did not include these categories in the table. However, four of our plans did have participants in these 

categories: the US Airways Flight attendants plan, the Weirton retirement program plan, the Trans World Airlines plan for its employees, and the National Steel corporation retirement program. All 

these plans had sufficient plan assets to cover 100 percent of the unfunded PC2 benefits. 

g

The funded percentage was not calculated for the PC4 category in some plans. According to PBGC officials, this may have been because it was obvious that assets were insufficient so that 

calculating the funded status was unnecessary. 

h

Not applicable because PC3 benefits were 100 percent funded by plan assets. 

i

IAM & AW stands for the International Association of Machinists and Aerospace Workers.
Appendix IV: Comments from the Department 

of the Treasury

Page 48 GAO-12-168 Delphi Pension Plans 

Appendix IV: Comments from the 

Department of the Treasury
Appendix IV: Comments from the Department 

of the Treasury

Page 49 GAO-12-168 Delphi Pension Plans 
Page 50 GAO-12-168 Delphi Pension Plans 

Barbara D. Bovbjerg, (202) 512-7215, bovbjergb@gao.gov

In addition, Margie K. Shields, Assistant Director; Mark M. Glickman, 

Analyst-in-Charge; James Bennett; Susan Bernstein; A. Nicole Clowers; 

Julie DeVault; Heather Krause; Edward Leslie; Kathy Leslie; Sheila 

McCoy; Edda Emmanuelli-Perez; Bryan Rogowski; Raymond Sendejas; 

and Craig Winslow made significant contributions to this report. 

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 
Related GAO Products

Page 51 GAO-12-168 Delphi Pension Plans 

Delphi Corporation: Key Events Leading to Termination of the Delphi 

Defined Benefit Plans, GAO-12-234T. Washington, D.C.: Nov 14, 2011.

Key Events Leading to the Termination of the Delphi Defined Benefit 

Plans. GAO-11-373R. Washington, D.C.: March 30, 2011.

Troubled Asset Relief Program: Automaker Pension Funding and Multiple 

Federal Roles Pose Challenges for the Future. GAO-10-492. Washington, 

D.C.: April 6, 2010.

Troubled Asset Relief Program: The U.S. Government Role as 

Shareholder in AIG, Citigroup, Chrysler, and General Motors and 

Preliminary Views on its Investment Management Activities. 

GAO-10-325T. Washington, D.C.: December 16, 2009.

Troubled Asset Relief Program: Continued Stewardship Needed as 

Treasury Develops Strategies for Monitoring and Divesting Financial 

Interests in Chrysler and GM. GAO-10-151. Washington, D.C.: November 

2, 2009.

Pension Benefit Guaranty Corporation: More Strategic Approach Needed 

for Processing Complex Plans Prone to Delays and Overpayments. 

GAO-09-716. Washington, D.C.: August 17, 2009.

Pension Benefit Guaranty Corporation: Financial Challenges Highlight 

Need for Improved Governance and Management. GAO-09-702T. 

Washington, D.C.: May 20, 2009.

Auto Industry: Summary of Government Efforts and Automakers’ 

Restructuring to Date. GAO-09-553. Washington, D.C.: April 23, 2009.

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 

Transparency and Accountability Issues. GAO-09-504. Washington, D.C.: 

March 31, 2009.

Auto Industry: A Framework for Considering Federal Financial 

Assistance. GAO-09-242T. Washington, D.C.: December 4, 2008.

Troubled Asset Relief Program: Additional Actions Needed to Better 

Ensure Integrity, Accountability, and Transparency. GAO-09-161. 

Washington, D.C.: December 2, 2008.

Related GAO Products
Related GAO Products

Page 52 GAO-12-168 Delphi Pension Plans 

Pension Benefit Guaranty Corporation: Improvements Needed to Address 

Financial and Management Challenges. GAO-08-1162T. Washington, 

D.C.: September 24, 2008.

Pension Benefit Guaranty Corporation Single-Employer Insurance 

Program: Long-Term Vulnerabilities Warrant “High Risk” Designation. 

GAO-03-1050SP. Washington, D.C.: July 23, 2003.

(131077)
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