Rejected by justice, pensioners take their last shot to save pensions
WASHINGTON – Dave Muffley thought he did when it came to a solid retirement. The Indiana man spent about 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 year.
But when GM plunged into the largest industrial bankruptcy proceeding in history in 2009 and the federal government brokered its restructuring, Muffley’s planned retirement package was cut and his life’s trajectory soared.
The Russiaville resident, now 68, has lost 30% of his retirement savings, his promised healthcare coverage and his trust in the government.
Muffley is one of nearly 20,000 Delphi workers affected by GM’s 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 resort.
Now they expect Congress to do for them what the courts would not do. Legislation to restore workers’ retirement savings has won support from left and right in Congress. It passed the House on Wednesday and supporters hope the Senate will follow suit.
It is named after the Susan Muffley Act, after Dave’s wife, who fell ill and died while they were dealing with the hit to her pension fund.
The pensioners allege they were discriminated against as salaried employees, compared to unionized workers whose pensions were preserved during the bankruptcy. Salaried employees are the engineers, technicians, and mid-level employees who fall between the well-paid executives and the unionized workers of the company.
After taking a Delphi buyout at 55 to avoid a possible layoff, Muffley says, he took one job after another to guide him until he could retire at 62. It was around this 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 lost at least $130,000 in savings due to pension cuts over the years, and he’s not alone.
Despite bipartisan support, there is some resistance in Congress to spending taxpayers’ money to bail out pension funds.
For retirees, the fight to get legislation into law is the last and perhaps the last battle in a test that began when workers were swept up in the macroeconomic riptides of the recession.
Muffley and others started the Delphi Salaried Retirees Association in 2009 – a kind of support group for workers at the auto parts company who had to overcome not only job losses, but also pension cuts and the loss of health plans.
Retirees tell stories of loss, severe depression, divorce and changing the course of their lives. Some children of retirees have postponed their college studies, other workers have had health problems due to the stress of the cuts.
The salaried retirees have won support from all corners of local government, state legislatures, attorneys general, and even sympathetic words from this and last president.
Presidential candidate Joe Biden said in September 2020 that he would work with senators to help restore Delphi workers’ retirement savings. The following month, President Donald Trump issued a memo calling on the Treasury Department and other agencies to take action on the issue.
But those words did not translate into action. Nothing came of Trump’s memo. Nothing happened in the first 18 months of the Biden administration either.
A number of legislative proposals to help Delphi workers have come and gone over the years without becoming law. The latest bill, which was approved by the House by a vote of 254 to 175, would restore workers’ benefits and retroactively compensate for what they have lost since 2009.
Members of Congress from both parties, primarily from Michigan, Indiana and Ohio, 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 supporting him.
The co-sponsors span the spectrum, from Rep. Mo Brooks of Alabama, founder of the conservative House Freedom Caucus, to Rep. Andy Levin of Michigan, a member of the progressive caucus.
The White House released its own statement Friday in support of the bill, saying the administration “supports a secure retirement for affected workers.”
Muffley points to other legislative savings for pension plans, such as the bipartisan Butch Lewis Act that was included in the US bailout. This provision blocked the insolvency of about 200 multi-employer pension plans for 30 years, saving the benefits of about 3 million workers. Biden shed light on the measure during a recent visit to Ohio.
But there are skeptics. During Wednesday’s House debate, Rep. Bob Good, R-Va., called the measure “a Democratic bailout bill by nanny-state sponsors.”
“Why should voters in my 5th district in Virginia pay for someone else’s retirement plan?” he said.
HOW IT GOT HERE
When GM filed for bankruptcy in June 2009 due to massive losses during the Great Recession, the company said it would not meet the pension obligations of Delphi unit employees – largely because it did not had no agreement with them, as she had negotiated with unions for hourly workers.
The Pension Benefit Guaranty Corp. The government then assumed responsibility for the pension scheme for the 20,000 employees and reduced monthly benefits for workers and pensioners if they exceeded the statutory maximum benefit the agency was guaranteed to pay. As a result, the pensions of some retirees have been reduced by up to 70%. But GM stepped in to cover union workers’ pension losses.
Those who lost their benefits were 4,044 workers in Indiana, 5,181 in Ohio, 5,859 in Michigan and thousands more across the country.
While bankruptcy cuts are not uncommon, Delphi workers argued that it was unfair that union workers’ pensions were protected by GM while salaried workers were left with permanent cuts to their retirement funds as well. than permanent reductions in their health benefits.
The arrangement took place in conjunction with a deal brokered by then-Treasury Secretary Tim Geithner and then-National Economic Council Director Larry Summers, who led a task force that sunk millions of dollars to save GM.
Part of the rationale at the time was the need to prevent unionized workers from striking, while salaried workers were seen as more durable.
A 2013 inspector general report said that if unionized workers had leverage “to prolong Delphi’s bankruptcy or strike, which GM said would have a significant impact on its ability to survive, retirees Delphi employees had no leverage, other than what they hoped was political leverage.”
The report estimates that salaried retirees lost $440 million in pension benefits. In today’s dollars, retirees would need $900 million to be cured.
In a 2011 editorial in The Washington Post, Geithner said bankruptcy “meant sacrifices at every level – from management, unions, shareholders, creditors and dealers.” But the intention was “to keep the US auto industry from collapsing” and causing a deeper recession that could have cost tens of thousands more jobs.
Geithner declined to comment for this story. Summers did not respond to a request for comment.
In January, the Supreme Court rejected efforts by Delphi retirees to review their case. The court effectively upheld a federal court ruling that the law allows troubled pension plans to be closed without court approval.
Kildee, one of the bill’s sponsors, told The Associated Press that the case was “particularly egregious because it was the federal government that engineered the bankruptcy.”
Turner said during the House debate that legislation was needed because “no one else has asked the White House to 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 targeted and it was the government that caused this,” said Bruce Gump, who lost 40% of his pension and is president 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 are finally getting the attention of the Secretary of the Treasury and of 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 routine outpatient surgery, caused by an undiscovered brain tumour. With her husband now paralyzed on the right side and with limited speech abilities, Julie Naylor says that without the health care she was promised, the medical bills have piled up.
Bruce Naylor is 6ft 6in and too tall for his wheelchair. Julie Naylor says if her family had the money owed to them through their pension, “I wouldn’t have to wait for Medicare” to be approved for a chair that’s right for her. “We could have bought it with what is owed to us,” she said.
“We live a very austere life and a very uncertain life,” she said. “I never thought he could lose half his pension and half his savings.”
The legislation would require the government to “top up” the pensions of salaried Delphi workers, as GM did for union workers.
Bill Kadereit, president of the National Retiree Legislative Network, said the Delphi workers’ struggle highlights the archaic nature of corporate bankruptcy law and how it can harm workers.
“In many ways, the feds basically threw them under the bus and sacrificed these people to get a deal done,” he said.
For Muffley, that’s what made the case so painful.
“I can’t believe our government would do something like this,” he said before the House vote.
And Muffley has a warning for those who might think their own promised benefits are secure: “If the government could do this to us, what else could it do to you?
Associated Press writer Kevin Freking contributed to this report.
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