In 1999, General Motors spun off its entire components manufacturing business which was extensive and worldwide. Not quite six years later, October 2005, the fledgling corporation known as Delphi Automotive filed for bankruptcy. In February, 2009, the Bankruptcy Court determined that Delphi could terminate unvested retiree welfare benefits (medical, dental, vision and life insurance) without following the procedures set forth in Section 1114 of the Bankruptcy Code. The Court also appointed a Retirees' Committee, referred to as the 1114 Committee, for purposes including meeting and conferring with the debtors over any consensual modifications to the Provisional Salaried OPEB Termination Order in return for waiving or settling the right to appeal from entry of that order. The Court finalized its ruling authorizing Delphi to cease OPEB contributions as of April1, 2009.
Under the Settlement, the Debtors agreed that the Debtors would pay $8.75 million in overall subsidy payments to the Salaried Retirees' Committee for the benefit of Delphi's salaried retirees. The Settlement Order also authorized the Salaried Retiree 1114 Committee to form the DSRA VEBA Trust to offer a benefit eligible for the Health Coverage Tax Credit under Internal Revenue Code. The HCTC benefit now pays 72.5% of the cost of health and prescription drug benefits for eligible retirees who are at least 55 but not yet 65 and who are receiving benefits from the Pension Benefit Guaranty Corporation ("PBGC") because of termination of their defined benefit pension plan and turnover of the plan to the PBGC.
Subsequently the defined benefit pension plan of the salaried employees of the Debtors was terminated July 31, 2009 and the PBGC took over as trustee of the terminated defined benefit pension plan of the salaried retirees August 4, 2009, triggering eligibility for the HCTC. The Salaried Retirees 1114 Committee formed the DSRA VEBA Trust and together with the original DSRA VEBA Trust trustees, created a trust agreement to govern the DSRA VEBA Trust. A board of trustees for the DSRA VEBA Trust was appointed, and with the assistance of an outside insurance broker, the DSRA VEBA Trust obtained competitive quotes from various insurers and rolled out a benefit for eligible salaried retirees and their dependants, intended to be particularly attractive for those eligible for HCTC subsidies. Over 4700 retirees and dependants initially enrolled in the benefits offered. A hardship process was established that has provided further assistance to salaried retirees with extraordinary needs out of the funds provided by the Debtors.
Concurrent with the termination of the salaried employees defined pension plan, Delphi also terminated the hourly rate employees defined benefit pension plan and the PBGC also took over as trustee of that plan, again triggering eligibility for the HCTC.
The DSRA VEBA Trust trustees board voted to expand eligibility, contingent on the Bankruptcy Court's approval, to ensure that the hourly Delphi retirees would be eligible for HCTC subsidies available under the DSRA VEBA Trust benefit plans. The Court subsequently entered an order authorizing the VEBA to provide benefits for hourly retirees and their dependants, intended to be eligible for the HCTC subsidies. Thereafter, numerous hourly employees elected the more heavily HCTC-subsidized benefit from the DSRA VEBA Trust over what they might have otherwise been eligible for under agreements with General Motors.