(August 8, 2013) — Retired executives in the General Motors (GM) pension plan have had their appeal to increase pension benefits thrown out by a Court of Appeals.
The case first came to light after the Obama administration imposed a restriction on the GM pension benefits after it fell into administration. As part of the bankruptcy deal, pension benefits of more than $100,000 a year were to be cut by two-thirds.
The key provision laid out as part of the deal said:
“For executive retirees who have a combined tax-qualified SRP [state retirement provision] plus non-qualified benefit under this plan in excess of $100,000 per annum on a life annuity basis, the amount of benefits under this plan over the combined $100,000 per annum threshold shall be reduced by [two-thirds].”
A group of retirees, all members of a so-called top-hat pension fund designed for executive members of the GM company, had initially filed to force the company to increase their pension payout.
They argued GM had misquoted the pension plan language, and that the $100,000 a year benefit should not include their state retirement entitlements.
After a district judge ruled in GM’s favour in 2011, the retirees filed for the complaint to heard at a Court of Appeals.
The eight-page judgment seen by aiCIO, which was filed on August 6 at the Court of Appeals for the Sixth Circuit, threw out the appeal on the basis that the retirees were not able to substantiate their claims.
The Court of Appeals was asked to interpret if GM’s understanding of the provision above had led to a denial of benefits which was “arbitrary and capricious”.
The retirees also claimed GM failed to respond to a letter from them–asking for a redetermination of benefits under the pension plan’s standard “claim and denial” procedures–before the court cases had begun, and that this tardiness entitled the retirees to financial remedies.
The Court of Appeals dismissed the retirees’ initial claim, with the three judges deciding that GM was right in its interpretation of the text, and that the retirees had failed to establish that the provision was “ambiguous”.
On the need for financial remedy for missing the initial 60-day deadline to contact the retirees after their “claim and denial” complaint, the court also found in GM’s favour.
The retirees did not show “that the procedural errors they allege affect the substance of their claims”, the document said, and therefore they were not entitled to substantive remedies from the court.
GM saved $221 million by ending a portion of its Supplemental Employee Retiree Plan, according to a report in the Detroit News.
Most top executives’ pensions were cut by two-thirds, including former GM CEO Rick Wagoner, whose pension fell from roughly $20 million to about $8.5 million, the paper said.
The government initially owned 61% of the resulting version of GM, but has since reduced its ownership stake to about 13%. GM became a publicly traded company again in November 2010. The Treasury has said it expects to complete its stock sell-off by the end of March.
Overall, GM has saved $4.6 billion by trimming pension and retiree health care benefits during its bankruptcy reorganisation, the company said in a filing in 2010.
Related Content: At GM, Lieutenant Becomes CIO and Borst Quits GM for Navistar