8-16-09: Delphi Salaried PBGC Plan Q&A's
Published: Sunday, 16 August 2009 11:47
Below are a set of answers from the PBGC for questions you have had since the termination July 31, 2009 and the recent August 10,2009 Trusteeship. There will be more, these were the ones they could answer now and were critical. You will see these posted at their website which now has a page dedicated to servicing our case. These questions and answers will be on their web site next week, but they won’t appear in the same form presented in the attached document. They have created plan-specific pages for the Delphi plans on their web site, and those pages include links to Delphi-specific and general FAQs.
Delphi Salaried PBGC Plan Q&A
Q1. How is the maximum guaranteed benefit determined for each plan participant?
Each year PBGC calculates the maximum guaranteed benefit for plans terminating during that year using a formula specified in the federal pension law, ERISA. For Delphi’s plans, the maximum guaranteed benefit is based on 2009 amounts, because Delphi’s plans were terminated on July 31, 2009. The amount is adjusted for each participant based on his or her type of annuity and the age in years and months at which he or she begins receiving benefits from PBGC.
For plans terminating in bankruptcies that began on or after September 16, 2006, the bankruptcy date is used instead of the date of plan termination. Because Delphi entered bankruptcy before September 16, 2006, the Delphi plans are not subject to this provision.
If you are a Delphi plan participant who was already retired when your plan terminated, the maximum guaranteed benefit is based on your age in years and months as of July 31, 2009. For Delphi plan participants who begin receiving payments from PBGC at age 65 and have no survivor benefit the maximum guarantee is $4,500.00 per month ($54,000.00 per year.) The maximum guarantee is lower if you begin receiving payments from PBGC before age 65 or if your pension includes benefits for a survivor or other beneficiary. The maximum guarantee is higher if you are over age 65 when you begin receiving benefits from PBGC. (http://www.pbgc.gov/workers-retirees/benefits-information/content/page789.html#2009
Q2. I am receiving an early retirement supplement bridge until age 62. Is my bridge benefit guaranteed by PBGC? If it is not guaranteed, under what conditions might some of this benefit be payable by PBGC?
Your early retirement supplement that is payable under the plan until age 62 may be partially guaranteed by PBGC. Generally, PBGC cannot guarantee any monthly pension amount that is greater than the monthly benefit your plan would have provided you as a straight life annuity at your normal retirement age.
Since your supplement ends before your normal retirement age, it is not necessarily fully guaranteed. However, if your pension benefit (not including the supplement) increases at age 62 when your supplement ends, the part of your supplement that brings your benefit up to the amount that the plan would have provided you as a straight life annuity at normal retirement age may be guaranteed.
For example, suppose your normal retirement benefit as a straight life annuity at age 65 is $2,000, but you retire at age 55 with a reduced benefit of $1,000 per month as a straight life annuity and an early retirement supplement of $1,800 until age 62, for a total benefit of $2,800. When your supplement ends at age 62, your benefit is recalculated without any reduction for early retirement, and your benefit from age 62 on is $2,000. Then, assuming there were no other legal limitations affecting your benefit, PBGC would guarantee your $1,000 pension benefit and $1,000 of your supplement for a total of $2,000 until age 62, and your entire $2,000 benefit from age 62 on.
Your entire benefit including the supplement is subject to additional legal limitations (such as the maximum guaranteed benefit discussed above), which are applied independently of one another, so that more than one limitation may apply to any given benefit. Please see the Frequently Asked Questions (FAQ) on our website at PBGC.gov for more details.
However, if the plan has enough assets when it terminates, you may receive some of the nonguaranteed part of your benefit from PBGC. Please see Q6 below for more information.
Q3. Now that PBGC has trusteed my plan, will I be able to choose to withdraw my employee contributions to the plan in a lump sum?
PBGC trusteed the Delphi pension plans on August 10, 2009. If you have already begun to receive pension benefits from the plan, you will not be permitted to withdraw your employee contributions in a lump sum. Your benefit will continue to be paid in the form of annuity you elected when you retired.
If you have not already begun to receive payments from the plan, PBGC can allow you to withdraw your employee contributions in a lump sum. After PBGC has determined the effect of the contributions on your benefit, we will send you information on your benefit and offer you the opportunity to withdraw your employee contributions. You will have 60 days from that notification to elect the lump sum distribution; after the 60 days have passed, you will no longer have the option of taking the contributions in a lump sum.
Q4. If I withdraw my employee contributions, will the maximum guaranteed benefit limit applicable to my remaining annuity benefit be adjusted downwards?
Yes. If you withdraw your employee contributions in a lump sum, your maximum guaranteed benefit will be reduced by the monthly annuity amount the contributions would have provided on the date you start to receive your remaining annuity benefits.
If you do not withdraw your employee contributions, but take the annuity payments they provide when you start receiving your pension benefits, the full amount of your annuity payments including the part attributable to the employee contributions will be limited by the maximum guaranteed benefit limit.
Q5. I retired several years ago and elected a benefit that will pay my spouse a benefit after my death. Will I elect a new form of annuity now that PBGC has become trustee of my plan?
No. If you started receiving your benefit before PBGC took over your plan, you will continue to receive your benefits in the same form of annuity.
Q6. What are PBGC's "priority categories," and how do they affect my benefit?
As PBGC determines your guaranteed benefit, we also determine whether the assets available in your plan will provide benefits greater than the guaranteed benefit. These assets are allocated to benefits according to priority categories set by law.
Assets are first allocated to repay employee contributions to the plan. Voluntary contributions fall in Priority Category 1 (PC1), and mandatory contributions are in Priority Category 2 (PC2).
Next, assets are allocated to plan benefits that were payable three years before the plan’s termination date as determined under the plan provisions in effect five years before the plan’s termination date. These benefits are in Priority Category 3 (PC3), and include pension benefits that are guaranteed by PBGC as well as those that are not guaranteed.
All other benefits guaranteed by PBGC that are not in higher priority categories are in Priority Category 4 (PC4).
Nonguaranteed benefits that are not in higher priority categories are in Priority Categories 5 or 6 (PC5 or PC6). They are in PC5 if they are nonforfeitable (vested) as of the plan’s termination date. Otherwise, they are in PC6.
The most typical scenario in which a participant may receive more from PBGC than his or her guaranteed benefit is a case in which all or much of the participant’s benefit is in PC3 and the plan’s assets cover all or most of the benefits in PC3.
Q7. How will PBGC's recoveries in the bankruptcy affect the payment of benefits?
Some of the money PBGC recovers from the plan sponsor during bankruptcy proceedings is for contributions the company should have made to the plan but didn’t. This portion is used to increase the amount of plan assets applied to benefits as described in the question above.
Another portion of PBGC’s recoveries is used to provide benefits promised by the plan that PBGC does not guarantee and that aren’t covered by the plan’s assets. These recoveries are applied to non-guaranteed benefits in the same priority order as the assets, beginning in the Priority Category where the assets ran out.
Q8. When does PBGC expect to adjust benefits to guaranteed levels for those participants who will see a reduction? How long will it take to determine final benefit amounts?
It will take us several months to review all the information needed to calculate our estimated guaranteed benefits for the entire plan. Given the number of participants, the complexity of the plan, and our desire to give you as accurate an estimate as possible, we expect that it may be six to nine months before we adjust benefits to the estimated amount of your PBGC benefit.
It will take us several years to perform a complete review of the plan and determine the final benefit amounts. After we have completed our review of all plan data and records, we will notify you in writing of your PBGC benefit and your right to appeal our determination. If you are receiving an estimated benefit, the letter will inform you whether your future payments will change and, if so, how much higher or lower they will be than the amount you are currently receiving.