Rejected by courts, retirees take last shot to save pensions

When General Motors went through the biggest industrial bankruptcy proceedings in history, 20,000 retirees from GM's Delphi Corp. subsidiary saw their retirement savings slashed

Dave Muffley thought he had it made when it came to a solid retirement. The Indiana man spent roughly 30 years as a salaried maintenance technician for Delphi Corp., a subsidiary of General Motors Corp., and expected to retire with a comfortable income by the time he hit 62.

But when GM plunged into the biggest industrial bankruptcy proceeding in history in 2009, and the federal government negotiated its restructuring, Muffley’s expected retirement package was slashed, and his life’s trajectory would spiral.

The Russiaville resident, now 68, lost 30% of his retirement savings, his promised health care coverage and his faith in government.

Muffley is one of an estimated 20,000 Delphi workers hurt by the GM bankruptcy, and many have spent the past 13 years fighting to get back what they lost. After taking the issue all the way to the U.S. Supreme Court, which declined to hear their case this year, the retirees were cut off from their last legal remedy.

Now, they’re looking to Congress to do for them what the courts would not. Legislation to restore the pension savings of the workers has gained support from both the left and the right in Congress. It passed the House on Wednesday and supporters are hopeful the Senate will follow suit.

It's named the Susan Muffley Act, after Dave's wife, who became sick and died while they were grappling with the hit to his retirement fund.

The retirees allege that they were discriminated against as salaried employees, compared with union-covered workers whose pensions were preserved through the bankruptcy. The salaried workers are the engineers, technicians and mid-level swath of employees who stood between the well-paid executives and the union-covered workers at the company.

After taking a buyout from Delphi at age 55 to avoid a potential layoff, Muffley says, he took one job after another to tide him over until he could retire at 62. It was in that time that his wife was diagnosed with pancreatic cancer and died within three years.

“Things fell apart, and things fell apart in a big way,” Muffley says. He estimated he’s lost at least $130,000 in savings due to the pension cuts over the years, and he’s not alone.

Despite the bipartisan support, there is some resistance in Congress to spending tax dollars to bail out pension funds.

For the retirees, the struggle to get the legislation into law is the latest and perhaps last battle in an ordeal that started when the workers got swept up in macroeconomic crosscurrents of the recession.

Muffley and others in 2009 established the Delphi Salaried Retirees Association — something of a support group for workers at the auto parts company who had to get through not only job losses, but retirement cuts and the loss of health plans.

Retirees tell stories of loss, severe depression, divorce and altered courses of their lives. Some retirees' children put off going to college, other workers faced health difficulties from the stress of the cuts.

The salaried retirees have gotten support from every corner of local government, state legislatures, attorneys general and even sympathetic words from this president and the last.

Presidential candidate Joe Biden in September 2020 said he would work with senators to help restore Delphi workers’ retirement savings. The next month, President Donald Trump issued a memo calling on the Treasury Department and other agencies to act on the issue.

But those words didn't translate into action. Nothing came of Trump's memo. Nor did anything happen in the first 18 months of the Biden administration.

A number of legislative proposals to help the Delphi workers have come and gone over the years without becoming law. The latest bill, which cleared the House on a 254-175 vote, would restore the workers' benefits and retroactively make up for what they've lost since 2009.

Members of Congress from both parties, mostly from Michigan, Indiana and Ohio, have sponsored the legislation. Reps. Dan Kildee, D-Mich., and Mike Turner, R-Ohio, and Ohio Sens. Sherrod Brown, a Democrat, and Rob Portman, a Republican, are among those backing it.

Co-sponsors span the spectrum, from Rep. Mo Brooks of Alabama, a founder of the conservative House Freedom Caucus, to Rep. Andy Levin of Michigan, a member of the progressive caucus.

The White House on Friday issued its own a statement in support of the bill, saying the administration “supports a secure retirement for affected workers.”

Muffley points to other legislative saves for pension plans, like the bipartisan Butch Lewis Act that was included in the American Rescue Plan. That provision stalled the insolvency of roughly 200 multi-employer pension plans for 30 years, saving the benefits of roughly 3 million workers. Biden spotlighted the measure in a recent visit to Ohio.

But there are skeptics. During House debate on Wednesday, Rep. Bob Good, R-Va., called the measure another “Democrat bailout bill by the sponsors of the nanny state.”

“Why should the constituents of my Virginia 5th District pay for someone else’s retirement plan?" he said.

HOW IT GOT HERE

When GM went through bankruptcy in June 2009 due to massive losses during the Great Recession, the company said it would not assume pension liabilities for the Delphi unit's salaried workers — largely because it didn't have an agreement with them, as it had negotiated with unions for hourly workers.

The government's Pension Benefit Guaranty Corp. then assumed responsibility for the 20,000 salaried workers’ pension plan, and cut workers' and retirees’ monthly benefits if they were larger than the statutory maximum benefit that the agency was guaranteed to pay. As a result, some retirees' pensions were cut by as much as 70%. But GM did step in to cover pension losses for union workers.

Those who lost benefits were 4,044 workers in Indiana, 5,181 in Ohio, 5,859 in Michigan and thousands of others around the country.

While cutbacks in bankruptcies aren't uncommon, the Delphi workers argued it was unfair that union workers' pensions were protected by GM while salaried workers were left with permanent cuts to their retirement fund as well as permanent cuts to their health benefits.

The arrangement played out in conjunction with a deal negotiated by then-Treasury Secretary Tim Geithner and then-National Economic Council Director Larry Summers, who led a task force that sank millions of dollars into saving GM.

Part of the rationale at the time was the need to keep union workers from striking, while salaried workers were seen as more expendable.

A 2013 inspector general's report said that while the union workers had leverage “to prolong Delphi’s bankruptcy or strike, which GM believed would significantly impact its ability to survive, Delphi’s salaried retirees had no leverage, other than what they hoped would be political leverage.”

The report estimated the salaried retirees had lost $440 million in pension benefits. In today's dollars, the retirees would need $900 million to be made whole.

In a 2011 op-ed in The Washington Post, Geithner said the bankruptcy “meant sacrifices across the board — from managers, unions, stockholders, creditors and dealers.” But the intent was “to stop the American automobile industry from unraveling” and causing a deeper recession that could have cost tens of thousands of additional jobs.

Geithner declined to comment for this story. Summers did not respond to a request for comment.

In January, the Supreme Court denied Delphi retirees' efforts to review their case. The court effectively upheld a federal court's ruling that the law allows for distressed pension plans to be closed without court approval.

Kildee, one of the bill's sponsors, told The Associated Press the case was "particularly egregious because it was the federal government that engineered the bankruptcy.”

Turner said during the House debate that legislation was necessary because “no one else has had the White House pick winners and losers and take away their pensions. It is our responsibility as members of Congress to address this injustice."

WHAT THE WORKERS SAY

“The reality is that salaried workers were singled out and it’s the government that caused this,” said Bruce Gump, who lost 40% of his pension and serves as chairman of the Delphi Salaried Retirees Association.

“I was 57 when this happened to me and it was a tough time, for this to happen at the bottom of the recession," he said. “The fact that we’re finally getting the attention of the secretary of treasury and Congress creates some hope in us."

Julie Naylor, a 68-year-old former nurse who lives in a suburb of Greenville, South Carolina, says restoring her husband’s pension and health care would mean she could afford basic necessities for her family. Her husband, Bruce Naylor, suffered a stroke after a routine outpatient surgery, caused by an undiscovered brain tumor. With her husband now paralyzed on his right side and with limited speech abilities, Julie Naylor says without the health care promised to him, the medical bills have piled up.

Bruce Naylor is 6 feet, 6 inches and too tall for his wheelchair. Julie Naylor says if her family had the money owed to them through his pension, “I wouldn’t have to wait for Medicare” to be approved for a chair that fits. “We could’ve just bought it with what is owed us,” she said.

“We live a very austere life and a very uncertain life," she said. “I never thought he could lose half of his pension and half of his life savings.”

WHAT'S NEXT

The legislation would require the government to “top up” the pensions of the salaried Delphi workers, as GM did for the unionized workers.

Bill Kadereit, president of the National Retiree Legislative Network, said the Delphi workers’ fight highlights the archaic nature of corporate bankruptcy law, and how it can harm workers.

“In many ways the federal government basically threw them under the bus and made the sacrifice of these people to make a deal,” he said.

To Muffley, that's what made the deal so painful.

“I can't believe our government would do something like this," he said in advance of the House vote.

And Muffley has a warning for others who may think their own promised benefits are secure: “If the government could do this to us, what else could they do to you?”

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Associated Press writer Kevin Freking contributed to this report.