Federal judge rules against Delphi retirees

Lockport Union-Sun & Journal (NY)

April 03-- Apr. 3--A recent ruling by a federal judge in southeast Michigan may have put an end to a nearly decade-long effort by a group of salaried Delphi retirees to regain their full pension benefits.

Those retirees, the Delphi Salaried Retiree Association, filed a lawsuit in September 2009 against the Pension Benefits Guarantee Corporation, which took over the pension plan for salaried Delphi employees after General Motors filed for bankruptcy earlier that year.

Delphi, formerly the nation's largest manufacturer of auto parts, declared bankruptcy itself in 2005 and was undergoing restructuring at the time.

The PBGC, a federal agency that manages pension plans, said at the time Delphi could not afford to maintain the already-underfunded pension plan, and that GM, which previously owned Delphi, refused to assume the pension plan.

When PBGC assumes control of a private pension plan, it applies its own complex payment formula and often pays less than what retirees expected to receive from a private pension provider. That was apparently the case for some of the 20,000 former Delphi employees covered under the plan.

PBGC wrote in a July 2009 press release it would pay benefits to the maximum set by law, which in 2009 was $54,000 per year for a 65-year-old and less for those who retired early or elected survivor benefits.

Delphi Salaried Retiree Association wrote in 2009 that thousands of its members stood to lose between 30 and 70 percent of their pension benefits.

A federal judge previously refused to issue a stay on PBGC's reduction of pension benefits, meaning most affected retirees have not received their full pension benefits since 2009.

"It caused tremendous hardship for a lot of folks," said Chuck Cunningham, legal counsel for the Delphi association.

The association argued that PBGC violated the law by not providing due process to the affected workers and failing to provide procedural safeguards for those affected by its assumption of the plan. The association also argued Delphi was not acting as a plan fiduciary but as a settlor when it entered its agreement with PBGC.

But Tarnow found in his March 22 ruling that PBGC did not violate the law or act "arbitrarily or capriciously" when it terminated the salaried plan.

Tarnow wrote the salaried plan was only about 50 percent funded at the time of its termination, no entity was willing to take on the plan after Delphi's liquidation and PBGC's action allowed more than 75 percent of plan beneficiaries to receive their full benefits. He granted PBGC's request for summary judgment and denied the retiree association's same motion.

"In this case, PBGC and Delphi agreed to terminate the salaried plan because the plan ... would be unable to pay benefits when due," Tarnow wrote.

Cunningham said about 1,000 retirees in Western New York received benefits under the salaried pension plan. Delphi's roots trace back to Harrison Radiator Company, founded by Herbert C. Harrison in Lockport in 1910.

In 1917, Harrison was sold to United Motors, which then was bought by General Motors the following year. It became Harrison Radiator Division, General Motors, until GM turned its component makers into Delphi Automotive Systems in 1995. By 1999, Delphi would become its own company, and Lockport's plant and technical center, at 200 Upper Mountain Road, became Delphi Thermal Systems, until the bankruptcy emergence in 2009.

Germany-based manufacturer MAHLE purchased Delphi's automotive thermal division, which includes centers in Lockport and Amherst, in 2015 for $727 million.

Affected Delphi retirees may have one last opportunity to gain back their full pension benefits. The retiree association has until May 21 to appeal Tarnow's decision with the U.S. Court of Appeals for the Sixth Circuit, based in Cincinnati.

Cunningham said the association will decide sometime "early next week" whether to appeal the decision, though they remain confident in their case.

"We're very disappointed," Cunningham said. "We still believe completely the law and fact were on our side. We'll make a decision where we're going from there."

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