A group of Delphi Corp. retirees challenging the PBGC's distress termination of their pension plan lost their bid to undo it after a federal appeals court in Michigan ruled against them.
The Pension Benefit Guaranty Corp. took over the Delphi Salaried Pension Plan in 2009, when Delphi spun off from General Motors Corp. and later filed for bankruptcy. The company emerged from bankruptcy in 2009 as Delphi Automotive LLP, without the pension obligations. During a government bailout, GM agreed to "top up" pension benefits to original levels for workers covered by three union agreements, but salaried and other workers got diminished pension benefits due to PBGC benefit caps.
A group of retirees participating in the salaried plan sued in U.S. District Court in Detroit in September 2018 challenging PBGC's takeover of the plan, which at the time of termination in 2009 had $2.5 billion in assets and $4.5 billion in liabilities, according to the PBGC website for the salaried plan.
After the court ruled against them, the retirees appealed to the 6th Circuit Court of Appeals in Detroit, arguing that the termination first required judicial adjudication, that it violated their due process rights, and that PBGC's decision was arbitrary and capricious.
The appeals court disagreed, saying that PBGC terminations of distress terminations do not require court approval, the PBGC action was not arbitrary or capricious, and the retirees "have not demonstrated that they have a property interest" in the full amount of the vested but unfunded benefits.
The appeals court added that its interpretation "is also supported by persuasive authority from other circuits." Writing for the three-judge panel, Judge Eugene Siler Jr. said Tuesday in the decision: "At bottom, it is inappropriate for this court to play armchair administrative agency with the benefit of hindsight."
PBGC officials declined to comment.
The agency's web page for the plan called it "a large and highly complex plan with a unique and complicated benefit and asset structure."
A second valuation of plan assets increased the value by $3 million.