Dodd-Frank News Center

GM pension "top up" agreement resulted from Treasury Department influence, SIGTARP says

This story appeared in Bank Digest.

Treasury Department designees acting under the authority of the Troubled Asset Relief Program used the government's leverage as General Motor's largest lender to influence the decision to "top up" the pensions of some hourly employees of Delphi, a GM subsidiary, according to a report by the TARP special inspector general. The combination of the Treasury's demand that GM resolve its bankruptcy in a period so short as to be unprecedented, combined with the ability of the United Auto Workers to delay that resolution, left GM with little choice but to include the top-up as part of its agreement with the union, according to Special Inspector General Christy Romero.

Automakers' Pension Obligations Studied

This story appeared in Bank Digest.

Following the commitment of $81 billion under the Troubled Asset Relief Program (TARP) to improve the domestic auto industry's competitiveness and long-term viability, the GAO has issued a report regarding pension obligations of General Motors and Chrysler. The report, which was issued as part of the GAO's oversight of TARP, examined the impact of restructuring on GM's and Chrysler's pension plans; the impact of restructuring on auto supply sector pension plans; and the impacts on Pension Benefit Guaranty Corporation (PBGC) and plan participants should auto industry pension plans be terminated. The report noted that across the auto sector as a whole, in January 2009, PBGC estimated that unfunded pension liabilities totaled about $77 billion, with PBGC's exposure for potential losses due to unfunded benefits of about $42 billion, leaving plan participants to bear the potential loss of the $35 billion difference through reduced benefits. The report also found that until the Treasury Department either sells or liquidates the equity it acquired in each of the automakers in exchange for the TARP assistance, its role as shareholder creates potential tensions with its role as pension regulator and overseer of PBGC in its role as pension insurer.

SEC and DOL Hold Hearing on Target Date Funds

This story appeared in SEC Today.

The SEC and the Department of Labor held a joint hearing on target date funds that included representatives of plan participants and beneficiaries, plan sponsors, investor organizations, academia and the financial services industry. SEC Chair Mary Schapiro said the varying results of these funds, which are intended to automatically shift to more conservative investments as a target date approaches, raised questions about the need for reforms or revisions. In 2008, the returns for 31 funds with a 2010 target date varied from minus 3.6% to minus 46%.

Of all of the issues that the SEC is examining in the aftermath of the economic crisis, Schapiro said the review of target date funds may be the one that most directly affects everyday Americans.

Retirement Plan Policy Adviser Aims to Bolster Savings

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digestand Individual Retirement Plans Guide, May 14, 2009.

In a signal that retirement issues have become a higher priority at the Treasury Department, J. Mark Iwry was named on April 27, 2009, to the newly created position of senior adviser to Treasury Secretary Timothy Geithner and deputy assistant secretary for retirement and health-care policy. Iwry was a non-resident senior fellow at the Brookings Institution before taking on his new role at the Treasury. He also worked for the Treasury during the Clinton administration as benefits tax counsel.