(August 8, 2012) — Emails have surfaced that could muddy the waters over how and why the Pension Benefit Guaranty Corporation (PBGC), the federal backstop for bankrupt plan sponsors, terminated the salaried pension plan of the auto parts maker Delphi Corp. in 2009.
The Treasury Department may have been involved in the decision by the PBGC to terminate Delphi’s salaried plan and take its more than $5 billion deficit onto the agency’s balance sheet, according to internal PBGC emails obtained by the Daily Caller. The emails also reveal that PBGC staffers may have been excluded from a Treasury meeting on the topic.
Treasury officials have sworn under oath that the PBGC moved to terminate the salaried plan of Delphi, a former General Motors subsidiary, on its own accord. Although no such bombshell exists in the released emails, if the Treasury Department did indeed pressure the PBGC to terminate Delphi’s plan, it could be a violation of the Employee Retirement Income Security Act of 1974.
The emails, published by the Daily Caller, a Washington, D.C.-based political news website, indicate Treasury participation in the discussions over the Delphi plan termination. In a memo to his staff, Vince Snowbarger, at the time the PBGC’s acting director, wrote in April 2009, “The auto team at Treasury is aware of this potential and have [sic] indicated we should do what we need to do.” Other emails show additional communication between the agency and officials in the Treasury Department over the ensuing months. In one, Joseph House, the director of the PBGC’s corporate finance and restructuring group, wrote to agency staffers about corresponding with Matthew Feldman, an official with the Treasury Department and a member of the Presidential Task Force on the Auto Industry, about the PBGC’s plan to deal with Delphi: “[Feldman] reported that he has made progress discussing our proposal with a number of key folks in Treasury and at White House [sic], but he has not yet wrapped up his coordination.”
Another email exchange suggests that PBGC staffers were “disinvited” from a meeting discussing Delphi. According to the emails, the meeting, ultimately aiming to “hammer out a global resolution for Delphi,” was slated for Monday, April 6. The invitation to the PBGC staffers, however, was abruptly withdrawn on Friday, April 3, when House wrote, “We’ve been disinvited. It’s for the best.” To the question of “Who uninvited us?,” he responded, “Treasury.”
Although the Daily Caller claimed the emails “contradict sworn testimony… given by several Obama administration figures,” the Treasury Department flatly denied any improprieties. “As we have previously stated, the termination of the Delphi salaried pension plan was made by the PBGC in accordance with its standard procedures and applicable laws—not by Treasury,” said Matt Anderson, a Treasury spokesperson. The PBGC did not immediately return a request for comment, but the agency has also stated categorically that it reached the decision to terminate Delphi’s plan independently.
Delphi, one of the largest automotive parts manufacturers, had its pension plans covering 70,000 beneficiaries—21,000 of whom were non-union—terminated in 2009 after the company had been in bankruptcy proceedings for several years. General Motors agreed to make whole the pension promises of Delphi’s union beneficiaries, however, and because the PBGC caps the maximum benefit at $54,000 for a retiree over 65, only the salaried beneficiaries who had pensions over that limit, or retirees under 65, saw reductions as a result of the plan termination. During this period, the PBGC did not have a director; Josh Gotbaum, the current director, was nominated in November 2009.
The US Government Accountability Office, an investigative department within the legislative branch, conducted its own study of the Delphi termination in December 2011. Its report found that “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.”