A 12+ year battle with the government ended Tuesday, when the Supreme Court decided not to hear the Delphi Salaried Retire Association appeal against the PBGC. The court didn’t even give a reason for not hearing the case.
If you don’t know what this is about, let me tell you the story.
When the economic disaster of 2009 occurred, and GM declared bankruptcy, the government stepped in and created a Task force to figure out how to keep GM afloat. The Auto task force was given power over decisions that would dictate what had to happen in order for the government to “loan” massive amounts of money to them. The companies involved did what they were told, or they would no longer exist.
Delphi was a company that was created by spinning off all of the automotive parts and component divisions years before. With the creation of the new company called Delphi, an agreement was made to transfer the money that was currently set aside for the employees pensions, (both the salaried and union represented workers).
A side agreement was negotiated with the UAW and it was included in the deal that assured the UAW that if the new company failed, GM would make up any differences or shortfalls the retired workers might get hit with as a result.
Not too many years after Delphi was created, they filed for Chapter 11 reorganization.
Years went by with lots of attempts to reorganize the company, selling off parts of it, and getting loans for companies that invest in failing companies. Throughout the years the employees were told that their pensions were funded, safe, and not to worry.
And then, the GM bankruptcy and Auto task force happened.
In order for GM to pull off their Chapter 11 fast track bankruptcy, the Auto task force required Delphi to also finalize their Chapter 11 bankruptcy. But, because Delphi had assets tied up that would have impeded GM fast track bankruptcy, the Auto Task force told the PBGC that they had to declare that the employees pensions were now under funded. The PBGC would move in and take them over.
The PBGC was a government creation to insure that Private company pensions could be secured, in case of company failure, by issuing insurances against those companies that continued to contribute to it.
GM and Delphi were insured by the PBGC.
6 months prior to the Auto Task force requiring the PBGC to make that announcement, the president of the PBGC had reviewed the Delphi pensions and stated that they were funded at an acceptable level.
The PBGC monitors funding levels to determine if, and when, they need to act.
And just like that, the PBGC swooped in and took the pensions over stating that they were significantly under funded.
So, in the end – many of the Salaried Retirees that had been getting payments from the pensions they were promised by GM, and subsequently Delphi, had the amounts slashed because the PBGC sets strict payout amounts based on a different formula then what was previously being used by Delphi. Some retirees lost over 30% of what they were being paid out each month. But, not everyone was impacted the same way because the formula was different for the people that had not yet retired from those that had previously retired. The worst off were the previous employees that were given an opportunity to retire using a special window retirement – their pensions calculations included a bump up as incentive to get them to retire early. The PBGC does not recognize those special incentives that were promised and provided by Delphi.
Independent Actuary Science accountants disagreed with that assessment, but the Bankruptcy judge allowed the Auto Task force to use the PBGC to do it anyways.
There are ERISA laws in place to make sure everyone is treated fairly in cases like this. They were ignored.
20,000+ salaried employees had been duped into believing that the Pensions they were promised were safe from anyone screwing with them. But, they weren’t.
This all happened in the 11th hour of the GM fast track bankruptcy negotiations being led by the Auto Task force and the subsequent Delphi bankruptcy by people that didn’t care what the repercussions were on the salaried employees.
The UAW represented employees were not impacted, as GM had previously agreed to, during contract negotiations to “bump up” their pensions to the level that they were entitled to.
The salaried employees never had that promise, nor did they feel the need to get one, from GM, upon being spun off. Salaried employees don’t have a union negotiating for them.
The 11th hour decisions, and subsequent lack of any opportunity to appeal or be represented in any of the bankruptcy court proceedings, left the salaried retirees pensions on the outside without the rights that they should have had protected by federal law and the constitution.
Apparently, Bankruptcy court judges, nor the PBGC, and certainly the Auto Task force did not have to obey the laws of our country.
The judges involved sided with the PBGC and the DSRA continued the long drawn out appeal process – all the way up until they were allowed to petition the Supreme Court.
During the long drawn out process that cost millions of dollars, agreements were made to “seal” evidence from anyone except the lawyers and the judges to see. The cost for continued litigation became too much, and the DSRA gave in to the sealed evidence demand by the government. With that, any chance of the truth being shared with a jury of their peers, or the media, or the salaried retirees themselves was lost forever.
The salaried employees were the only group of people impacted that were totally disenfranchised of the rights and protections in order to allow GM to be saved, via their fast track Chapter 11 bankruptcy, and specifically by the decisions of the Auto Task force.
The DSRA members continued their fight for fairness for over 12 years, at a cost to them in the millions of dollars.
The behavior of the government agency involved (the Treasury Department and the PBGC) was primarily based on obstruction of justice. They appealed every court decision and dragged their feet for years and years during the discovery phase of the lawsuit. Particularly when there might be evidence discovered that worked against them.
That is one reason it has taken 12 years to get to the highest court in the land to decide if they would hear the DSRA’s final appeal.
A government oversight committee also reviewed the actions by the Task force, and in a written report they indicated that the way things were not was done appropriate or right. The rationale used by the PBGC actuary was shown to be contrived and incorrect. Based on the opinion of independent actuaries, the pensions were sufficiently funded – at the time they were taken over.
Senate and House Representatives from around the country have also fought for years in support of the PBGC arguments of being treated unfairly.
Recently, State Attorney Generals from across the country, urged the SCOTUS to hear the DRSA appeal, to no avail.
Now, with no opportunity to fight the lawsuit any further, because the appeal process was denied at the SCOTUS – the effort by the DSRA needs to change direction.
The new focus needs to be on having the legislative branch of government, change the laws to clearly make what was done to the DSRA illegal.
What happened to the Delphi Salaried Retirees can NEVER happen again.
Regardless of the situation, Bankruptcy or not, Task force or not, Too big to fail or not – What happened the Delphi Salaried Retirees – cannot happen ever again.
Change, or create New, whatever laws that are needed to assure it won’t happen ever again.
Change bankruptcy laws, and put more stringent safe guards in place to truly protect any existing pensions of the companies restructuring. Make the employees, the first in line for protection, and not a bargaining chip.
Do it now!