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Delphi retirees clear significant legal hurdle against government

Bryan Alaspa's picture

The salaried retirees of Delphi cleared a major legal hurdle late on Friday afternoon when a judge ruled that their lawsuit against the Pension Benefit Guaranty Corp. could move forward. The victory means that the judge felt there was a case to be heard in an upcoming trial that would determine if the government, and PBGC, should have taken over the salaried retiree pension plan at the same time the hourly workers pensions were moved to GM.

The case is a legal tangle that involves employees of a subsidiary of GM that was spun off into its own entity. Delphi was the resulting company and then Delphi declared bankruptcy in 2005. The company then exited bankruptcy in 2009. However, when the federal government stepped in to buy GM things got a bit messy.

The hourly employees of Delphi had their pension transferred to PBGC, which is the company the federal government put in charge of managing pension plans that looked shaky due to failing businesses. However, when the PBGC took over the hourly pension, it also took over the salaried pensions. When the Obama auto task force released $4.3 billion to be paid to the hourly retirees, no money was then released to pay the salaried employees. This has led to accusations that the White House was releasing the money to stay on the good side of United Auto Workers and the International Union of Electrical Workers.

A lawsuit was brought against PBGC stating that they never should have taken over the salaried pension. Salaried retirees point to a report from a consulting firm called Watson Wyatt that showed the pension was not shaky but was 85% funded near the end of September 2009. The PBGC has argued that the federal judge, Arthur Tarnow, should throw out the case as baseless or state that they had the right to take over the funds.

With his ruling on Friday, however, Tarnow ruled mostly in favor of the salaried retirees. During Friday’s judgements, Tarnow ruled against the PBCG’s motions to dismiss and their motion for a summary judgement. The case can move forward into a discovery phase and beyond for the salaried retirees of Delphi.

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