WASHINGTON -- The Pension Benefit Guaranty said Wednesday that it will assume responsibility for the pension plans of 70,000 Delphi workers and retirees, as the troubled auto supplier continues to restructure under bankruptcy protection.
The federal agency said it is stepping in to protect salaried and hourly pensions because Delphi, which has been operating under bankruptcy protection for nearly four years, cannot afford to maintain them, and its former parent, General Motors, has said it will not assume them.
Troy, Mich.-based Delphi's hourly pension plan covers an estimated 47,000 people. The PBGC said it expects to be responsible for about $4 billion of the plan's shortfall of nearly $4.4 billion.
The company's salaried pension plan covers an additional 20,000 workers and retirees. The PBGC expects to be responsible for about $2.2 billion of its estimated $2.6 billion in underfunding.
The agency also will be responsible for $50 million in underfunding of four smaller Delphi plans with 2,000 participants.
The PBGC will pay pension benefits up to the limits set by law. The maximum benefit for a 65-year-old is currently $54,000 per year, but is lower for those who retire earlier or elect survivor benefits.
Delphi said Monday that it agreed to pay $3 billion to PBGC to settle the pension insurer's various claims against the company and its global affiliates. The PBGC also will receive additional funds from GM in exchange for liabilities associated with the company's various pension plans.
The settlement agreement has been filed in bankruptcy court for approval.
Delphi, GM's former parts division, was spun off from the Detroit-based automaker in 1999. In September 2008, GM took on about $2.5 billion in liabilities of Delphi's hourly pension plan. Until recently, it had been expected to assume the entire obligation for Delphi's hourly plan.
GM said Monday that it has met and continues to meet its obligations toward the Delphi pensions. The automaker noted that when it spun off Delphi, it agreed to top-up pension benefits for certain groups of hourly employees and retirees in the event that Delphi's hourly pension plan was terminated.
The automaker said it had reached a preliminary deal with the PBGC under which it would pay the insurer $70 million in cash, plus a portion of future payouts that GM will receive from the company that acquires Delphi assets.