Delphi Corporation: Pension Plans and
Bankruptcy

John J. Topoleski
Analyst in Income Security
November 9, 2011
Congressional Research Service
7-5700
www.crs.gov
R42076
CRS Report for Congress
Pr
epared for Members and Committees of Congress

Delphi Corporation: Pension Plans and Bankruptcy

Summary
The Delphi Corporation is a parts and components supplier to auto makers that was created in
1999 as a spin-off from General Motors (GM). In May 2009, the pension plans of Delphi were
terminated and responsibility for the payment of benefits to plan participants was turned over to
the Pension Benefit Guaranty Corporation (PBGC), which is a government-run corporation that
insures private pension benefits for workers in defined benefit (DB) pension plans. Although most
workers in pension plans that are terminated by the PBGC receive their promised benefits, some
workers may receive less than their full benefit. The PBGC may not pay an individual more than
a statutory maximum benefit.
In 1999, GM and some unions representing Delphi workers negotiated an agreement as part of the
spin-off. GM agreed to provide the workers covered by the agreements the difference between the
benefits earned under the plan and the maximum that the PBGC would pay if the pension plans
were terminated. Some union workers and the non-union-salaried employees of Delphi did not
have such a “top-off” agreement. Some contend that GM honored the top-off agreement under
pressure from the Presidential Task Force on the Auto Industry and that the Delphi pension plans
were terminated to facilitate restructuring in the auto industry. A group of former Delphi salaried
employees has filed a lawsuit against the PBGC.
This report provides background on Delphi Corporation, relevant pension law, the role of the
PBGC, and a description of major events at Delphi since 1999. This report will be updated as
activity warrants.

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Delphi Corporation: Pension Plans and Bankruptcy

Contents
Introduction...................................................................................................................................... 1
Background on Delphi Corporation................................................................................................. 2
Background on Pension Benefits..................................................................................................... 2
Employee Retirement Income Security Act .............................................................................. 3
Pension Benefit Guaranty Corporation ............................................................................... 3
PBGC Maximum Guarantee ............................................................................................... 4
Major Events of Delphi Pension Plans Since 1999 ......................................................................... 4
Pension Benefits and the Delphi Spin-Off................................................................................. 4
Delphi Bankruptcy and Pension Plan Terminations .................................................................. 4
Termination of Delphi Pension Plans ........................................................................................ 5
Legislation and Congressional Hearings ................................................................................... 7

Contacts
Author Contact Information............................................................................................................. 8

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Delphi Corporation: Pension Plans and Bankruptcy

Introduction
The economic downturn that began in December 2007 had a significant impact on U.S.
manufacturing in general and automobile manufacturing in particular. The automotive industry
underwent major restructuring in 2008 and 2009. To facilitate the restructuring, the U.S.
government provided two U.S. automakers—General Motors (GM) and Chrysler—with financial
assistance. In addition, on February 20, 2009, the Obama Administration announced the creation
of the Presidential Task Force on the Auto Industry.1 The task force was a Cabinet level group,
which was led by Secretary of the Treasury Timothy Geithner and the Director of the National
Economic Council, in the Office of the President, Larry Summers; it consisted of Cabinet and
other executive branch officials. The Task Force was to “discuss recently submitted restructuring
plans from Chrysler LLC and General Motors Corporation” and “to conduct additional analysis
and form initial recommendations in their [members of the Task Force’s] areas of expertise.”2
U.S. automakers deal with an extensive network of parts suppliers and components makers. These
companies faced financial difficulties as a result of the setbacks in the automotive industry.
Companies in the automotive supply chain were also a concern of some policy makers during the
restructuring.
Delphi Corporation is a “Tier 1” supplier that provides parts and components directly to vehicle
manufacturers; GM is Delphi’s largest customer.3 In 2005, Delphi declared bankruptcy. As part of
Delphi’s reorganization, GM agreed to assist Delphi by assuming some of the company’s pension
liabilities. GM declared bankruptcy on June 1, 2009, and in July 2009, GM announced that it
would not assume any of Delphi’s pension liabilities. The Pension Benefit Guaranty Corporation
(PBGC) assumed responsibility for Delphi’s defined benefit (DB) pension plans.
Once the PBGC assumed responsibility, some Delphi retirees may have seen their pension
benefits reduced if their monthly benefit was larger than the statutory maximum benefit that the
PBGC may pay. Some union workers whose pensions have been reduced by the PBGC may be
receiving supplemental “top-off” benefits provided by GM. GM negotiated agreements with some
of the unions who represent some Delphi workers to provide supplemental benefit if the pensions
are transferred to the PBGC. GM honored these “top-off” agreements when Delphi’s pensions
were terminated.
In September 2009, a group of current and future salaried employees filed a lawsuit against the
PBGC seeking restoration of their pension benefits and claiming that the Delphi pensions were
wrongly terminated. The case has not yet been resolved.

1 More information on the restructuring of the automotive industry is available in CRS Report R40003, U.S. Motor
Vehicle Industry: Federal Financial Assistance and Restructuring
, coordinated by Bill Canis.
2 See The White House, Office of the Press Secretary, Geithner, “Summers Convene Official Designees to Presidential
Task Force on the Auto Industry,” press release, February 20, 2009, available at http://www.whitehouse.gov/the-press-
office/geithner-summers-convene-official-designees-presidential-task-force-auto-industry.
3 Tier 1 suppliers provide parts and components directly to an automobile supplier. Tier 2 suppliers provide parts and
components to Tier 1 suppliers.
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Delphi Corporation: Pension Plans and Bankruptcy

Background on Delphi Corporation
Prior to 1989, GM directly owned many of the makers of parts and components for GM
automobiles. In 1989, GM combined many of these suppliers into one subsidiary company
(Automotive Components Group, or ACG). ACG was renamed “Delphi” in 1995. In 1999, GM
sold (or “spun-off”) Delphi by conducting an Initial Public Offering (IPO) of Delphi common
stock. Since 1999, Delphi has been a separate publicly owned corporation, although GM
continued to be Delphi’s largest customer.
Delphi workers who had been participants in the GM pension plans were transferred to newly
formed Delphi pension plans. Workers who had accumulated benefits in GM pension plans had
their benefit obligations transferred to Delphi plans. According to GM, GM transferred assets
sufficient to cover these benefit obligations.
Delphi’s workforce consisted of hourly employees and salaried employees. In general, the hourly
workers were union members whereas the salaried workers were not. The groups of workers had
separate benefit plans. To win their approval for the spin-off, GM made agreements with the
unions to protect certain post-retirement health and pension benefits.4 Because they were non-
union and therefore not subject to collective bargaining procedures, GM did not need the salaried
workers’ approval for the spin-off and salaried workers did not receive any benefit guarantees.
Background on Pension Benefits
About half of the U.S. workforce participates in one or more employer-sponsored pension plans.
The two kinds of pension plans are defined contribution (DC) and defined benefit (DB) pension
plans.
In DC plans, contributions from individual employees—and often their employers—are placed in
tax-advantaged accounts that accrue investment returns. The accounts are then used as a source of
retirement income. In DC plans, individual employees usually direct the investment decisions in
their own accounts and bear the risk for investment losses. These DC plans are known as 401(k),
403(b), or 457 plans, based on the appropriate sections of the tax code. Employees are responsible
for most of the decisions affecting their individual accounts.
DB pensions are employer-funded pension plans through which employees accrue monthly
benefits using a formula based on a combination of the number of years of service and salary. For
example, a plan might offer a benefit of 1.5% multiplied by the number of years of an employee’s
service multiplied by the average of the employee’s highest five years of salary. So a worker who
was employed for 30 years and averaged $50,000 for the final five years of employment would
receive a benefit of $22,500 per year or $1,875 per month.5 Employers are responsible for
ensuring that there are sufficient funds in DB pension plans to pay for current and future benefit
payments.

4 Federal law required that pension plans be subject to collective bargaining if the participants are union members.
5 The yearly benefit would be calculated as follows: (1.5% x 30 x $50,000 = $22,500).
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Employee Retirement Income Security Act
The Employee Retirement Income Security Act (ERISA; P.L. 93-406) protects the interests of
participants in qualified employee benefit plans.6 ERISA requires that benefit plans be operated
solely in the interest of the participants and beneficiaries and for the exclusive purpose of
providing benefits to participants and their beneficiaries.7 Among other provisions, ERISA
protects workers’ pensions by establishing vesting requirements (how long a person has to work
to be entitled to benefits); funding requirements (how much the employer must set aside to pay
for current and future benefit obligations); and pension insurance (which will pay participant
benefits in case of the plan sponsor’s bankruptcy). Under ERISA, participants in DB plans do not
own the plan assets, but have a claim on the amount of their vested benefits. Pension plan
sponsors may not reduce workers’ vested pension benefits.
Pension Benefit Guaranty Corporation
ERISA established a government corporation to insure the pension benefits of workers in private
sector DB plans. When an insured DB pension plan has insufficient funds and cannot pay all of
the promised benefits to the workers, the plan may be “terminated” and the retirees receive their
benefits from the Pension Benefit Guaranty Corporation (PBGC). Not all underfunded pension
plans are trusteed by the PBGC.8 The PBGC pays the pension benefits to which workers are
entitled, up to limits established by law (29 U.S.C. 1322). The PBGC does not pay benefits for
unpredictable contingent events or for a portion of benefits increased in the five years prior to
termination.9 The benefits to retirees paid by PBGC do not come from taxpayer funding, and the
benefit obligations of the PBGC are not obligations of the United States.10 To pay for its benefit
obligations, the PBGC collects insurance premiums from employers that sponsor insured pension
plans, receives funds from pension plans it takes over, and earns money from investments.11

6 A plan is qualified if it meets Internal Revenue Code requirements with respect to plan participation, vesting of
benefits, and distribution of benefits. See 26 U.S.C. 401(a). Qualified plans are eligible for favorable tax treatment,
such as deferred taxes on contributions and earnings.
7 See 29 U.S.C. 1104.
8 In FY2009, the PBGC insured about 27,900 DB pension plans covering 33.6 million people. In FY2009, the single-
employer program took in 144 newly terminated pension plans and had about 201,000 new participants. Further
information on the PBGC is available in CRS Report 95-118, Pension Benefit Guaranty Corporation (PBGC): A Fact
Sheet
, by John J. Topoleski. Further information on pension plan terminations is available in CRS Report RS22624,
The Pension Benefit Guaranty Corporation and Single-Employer Plan Terminations, by Jennifer Staman and Erika K.
Lunder.
9 Shutdown benefits are an example of an unpredictable contingent event. Shutdown benefits are found in large
unionized companies in the auto, steel, and tire and rubber industries. A company might agree to provide increased
pension benefits to employees in the case of plant closing or shutdown.
10 See 29 U.S.C. 1302(g)(2).
11 Because the PBGC assumes responsibility for DB pension plans that do not have enough assets to cover their future
benefit obligations, the PBGC itself has assets less than its benefit obligations. The deficit in the PBGC’s single-
employer program was $21.1 billion at the end of FY2009. The PBGC is on the Government Accountability Office’s
list of government operations that it identifies as “high risk.” For more information see GAO Report GAO-09-271,
High Risk Series: An Update, available at http://www.gao.gov/new.items/d09271.pdf.
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PBGC Maximum Guarantee
The maximum guarantee for a pension that was terminated in 2009 is $4,500 per month ($54,000
per year) for retirees who begin receiving pensions at the age of 65. The amounts are reduced so
that retirees receive “actuarially neutral” pension benefits if they choose benefits in a form other
than straight life annuity or if they begin receiving benefits before the age of 65.12 For example,
the maximum benefit for individuals who retire at 65 years old and choose a Joint and 50%
Survivor Annuity benefit is $4,050 per month ($48,600 per year). For retirees that choose to
receive single life annuity benefits at 55 years old, the maximum benefit is $2,025 per month
($24,300 per year). The PBGC reported in 2006 that 84% of retirees who receive benefits from
the PBGC are paid the full benefit amount they earned under their retirement plan.13
Major Events of Delphi Pension Plans Since 1999
Pension Benefits and the Delphi Spin-Off
As part of the spin-off in 1999, GM continued to pay the pension benefits to workers who retired
prior to October 1, 2000. The pension benefits of workers who retired on or after October 1,
2000, became the obligations of the various Delphi pension plans.
GM also entered into Benefit Guarantee Agreements with three unions representing its hourly
employees: the United Auto Workers (UAW); the International Union (IUE-CWA); and the
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers Union (USW). These agreements obligated GM in the event of a termination of the
Delphi hourly pension plans to supplement the benefits for workers who received the statutory
maximum benefit from the PBGC. GM agreed to pay each covered employee the difference
between the benefit received from the PBGC and the benefit the individual would have received
had the plan not been terminated.
Salaried employees did not have similar agreements in place. This is most likely because the
agreement of salaried employees was not necessary to complete the spin-off.
Delphi Bankruptcy and Pension Plan Terminations
Delphi filed for bankruptcy in October 2005. As part of the bankruptcy reorganization plan, GM
agreed to the transfer of up to $3.4 billion of liabilities from the Delphi Hourly Plan to the GM
Hourly-Rate Employees Pension Plan. On September 29, 2008, Delphi transferred liabilities of
approximately $2.6 billion and assets of approximately $0.5 billion from the Delphi Hourly Plan
to the GM Hourly-Rate Employees Pension Plan.

12 A change in the form of a pension benefit is actuarially neutral if the present discounted value of the benefit after the
change is equal to the present discounted value of the benefit before the change. Actuarially neutral pension benefits
are reduced for early retirement or for including a spousal benefit and are increased for delayed retirement.
13 See the 2006 edition of Pension Benefit Guaranty Corporation’s Pension Insurance Data Book, available at
http://www.pbgc.gov/docs/2006databook.pdf.
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On June 1, 2009, GM filed for bankruptcy. It subsequently received U.S. government financial
assistance to assist with its reorganization.14 In July 2009, GM advised Delphi that it would not
assume the Hourly Plan and would not transfer additional liabilities from Delphi to the GM
pension plans. Because GM declined to assume additional liabilities from the Delphi pension
plans, the PBGC terminated the Delphi pension plans, effective July 31, 2009.
GM announced that it would fulfill its obligations to the Hourly Plan retirees by supplementing
the pension benefits of those retirees who were receiving the maximum benefit from the PBGC.
According to GM,
[a]s a result of bargaining at the time of the spin-off, General Motors Corporation did agree
to supplement pension benefits for certain limited groups of hourly employees and retirees in
the event that the Delphi hourly pension plan was terminated. As with other union
agreements that it has assumed from the old GM, General Motors Company will honor these
commitments.15
Termination of Delphi Pension Plans
ERISA provides for three types of single-employer pension plan terminations: standard, distress,
and involuntary. The plan administrator initiates a standard or distress termination, whereas the
PBGC initiates an involuntary termination.16 The Delphi pension plans were subject to an
involuntary termination. Under 29 U.S.C. 1342(a), the PBGC may initiate involuntary
termination proceedings if one of the following criteria is met:
• the plan has not met the minimum funding requirements or the plan has been
notified by the Treasury Secretary that a notice of deficiency concerning the
initial tax on a funding deficiency has been mailed;
• the plan will not be able to pay benefits when due;
• a distribution of at least $10,000 has been made to a participant who is a
substantial owner of the sponsoring company and, immediately after the
distribution, the plan has unfunded nonforfeitable benefits; or
• the long-run loss to the PBGC “may reasonably be expected to increase
unreasonably if the plan is not terminated.”
The PBGC indicated that the Delphi plans met several of the criteria for termination. Delphi had
not made required contributions to the pension plans in the previous four years and the plan had
assets to pay for only half of its benefit obligations.

14 For more information on the 2009 events in the U.S. automobile industry, see CRS Report R41154, The U.S. Motor
Vehicle Industry: A Review of Recent Domestic and International Developments
, by Bill Canis and Brent D.
Yacobucci.
15 GM statement is available on PBGC’s website at http://www.pbgc.gov/FAQ/delphifaq.html.
16 More information on pension plan terminations is available in CRS Report RS22624, The Pension Benefit Guaranty
Corporation and Single-Employer Plan Terminations
, by Jennifer Staman and Erika K. Lunder.
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The PBGC has assumed responsibility for the following pension plans sponsored by Delphi:
• Delphi Hourly-Rate Employees Pension Plan—approximately 47,176
participants,
• Delphi Retirement Program For Salaried Employees—approximately 20,203
participants,
• Packard-Hughes Interconnect Non-Bargaining Retirement Plan—approximately
1,383 participants,
• ASEC Manufacturing Retirement Program—approximately 533 participants,
• Packard-Hughes Interconnect Bargaining Retirement Plan—approximately 165
participants, and
• Delphi Mechatronic Systems Retirement Program—approximately 148
participants.
On September 14, 2009, the Delphi Salaried Retiree Association (DSRA) filed a lawsuit against,
among others, the PBGC, the U.S. Treasury Department, and the Presidential Task Force on the
Auto Industry.17 Some of the DSRA’s claims include
• the termination of the Delphi Retirement Program for Salaried Employees was in
violation of the Due Process Clause of the Fifth Amendment to the U.S.
Constitution;
• the termination of the Delphi Retirement Program for Salaried Employees was in
violation of ERISA; and
• the agreement between GM and the unions representing hourly employees to
“top-off” the hourly employees’ pensions was a violation of the Equal Protection
Clause of the Fifth Amendment to the U.S. Constitution. The DSRA says that
GM, acting as a government actor owing to the U.S. Treasury’s role in the GM
bankruptcy, unfairly discriminated against the salaried employees “solely on the
basis of their choice not to associate with a union.” The DSRA feels that GM’s
bankruptcy in June 2009 voided the 1999 “top-up” agreements and that GM
renegotiated and provided the “top-up” to the unions’ pension plans for political
motivations.
The DSRA sought a preliminary injunction to prevent the PBGC from reducing the payments to
the pension plan participants while the case is pending. On January 26, 2010, the court ruled that
the PBGC could reduce the payments. The DSRA subsequently claimed that the PBGC has
violated the terms of that ruling. On September 9, 2011, the U.S. district court dismissed the
claims against the U.S. Treasury. The PBGC remains a defendant in the case.
The DSRA submitted an affidavit from a pension actuary stating that the PBGC miscalculated the
benefit obligations of the Delphi plans and that the pension plan for salaried employees was
86.52% underfunded and that it is rare for pension plans with this amount of underfunding to

17 See Dennis Black, Charles Cunningham, Kenneth Hollis, and the Delphi Retiree Association, Plaintiffs v. The
Pension Benefit Guarantee Corporation, The U.S. Presidential Task Force on the Auto Industry, Timothy Geithner,
Steven Rathner, Ron Bloom, and [John] Does 1-50, and General Motors Company, Case No. 2:09-cv-13616, filed in
United States District Court for the Eastern District of Michigan Southern Division.
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require termination.18 According to PBGC estimates, at time of termination the plans for the
Delphi Salaried Employees had $2.4 billion in assets and liabilities of $5 billion. The PBGC
indicated that it expected to be responsible for about $2.2 billion of the plan’s estimated $2.6
billion in underfunding.19
The Delphi court case remains ongoing.
Delphi emerged from bankruptcy in October 2009 after a group of Delphi’s lenders purchased
most of Delphi’s assets. In addition, GM purchased Delphi’s steering business and four
manufacturing facilities located in three states (Indiana, Michigan, and New York).20 Delphi
reported $13.8 billion in sales in 2010.21 For comparison purposes, the company reported $26.9
billion in revenue in 2005.22
On March 31, 2011, the PBGC announced that it had redeemed the PBGC’s stake in Delphi for
$594 million. The PBGC acquired the stake in Delphi as part of the pension plan termination
proceedings. The PBGC indicated that it did not know how this action would affect Delphi
retirees’ benefits, as the PBGC is continuing the process for determining final benefit amounts for
Delphi retirees. The PBGC has indicated that final determinations on benefits will be completed
in 2013.23
Legislation and Congressional Hearings
As of November 2, 2011, no legislation has been introduced in the 112th Congress with regard to
Delphi Corporation. The following legislation was introduced in the 111th Congress with regard to
Delphi Corporation:
• Senator Roger Wicker introduced S. 3526 on June 23, 2010, and Representative
Christopher Lee introduced H.R. 6046 on July 30, 2010. These identical bills
would have required the Government Accountability Office (GAO) to evaluate
the propriety of assistance provided to General Motors Corporation under the
Troubled Asset Relief Program.
• Representative Tim Ryan introduced H.R. 3455 on July 31, 2009, and Senator
Sherrod Brown introduced S. 1663 on September 11, 2009. These identical bills
would have provided up to $3 billion from the Emergency Economic

18 The affidavit stated that the average underfunding for the 100 largest pension plans was 81.7% in 2009. See the
Declaration of Jim Degrandis filed in Case No. 2:09-cv-13616 (mentioned in footnote 17).
19 See PBGC, “PBGC To Assume Delphi Pension Plans,” press release, July 22, 2009, available at
http://www.pbgc.gov/news/press/releases/pr09-48.html.
20 See “After 4 Years, Delphi Exits Bankruptcy With Sale of Assets to Lenders and G.M.,” NY Times, October 6,
2009, available at http://www.nytimes.com/2009/10/07/business/07delphi.html.
21 See Delphi Automotive LLP 2010 Consolidated Financial States, available at http://delphi.com/pdf/about/financials/
2010-Year-End-Financial-Statement.pdf.
22 See Delphi Reports Fourth Quarter and Calendar Year 2005 Financial Results, available at http://delphi.com/news/
pressReleases/pressReleases_2006/pr_2006_07_11_002/.
23 See Testimony of Deputy Director Vincent K. Snowbarger, Operations Pension Benefit Guaranty Corporation,
before the Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending Committee on
Oversight and Government Reform, U.S. House of Representatives, June 22, 2011, available at
http://oversight.house.gov/images/stories/Testimony/6-22-11_Snowbarger_Reg_Affairs_Testimony.pdf.
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Stabilization Act of 2008 (P.L. 110-343) to fund a Voluntary Employees’
Beneficiary Association (VEBA) for former employees of Delphi or General
Motors whose health care coverage was discharged as a result of the companies’
bankruptcy. This bill would not have provided any pension benefits to any former
Delphi employees. No further action was taken on either bill.
• Representative John Boehner introduced H.Res. 591 on June 26, 2009. Among
other provisions, this resolution would have requested that President Obama
transmit to the House of Representatives details of the role of the Presidential
Task Force on the Auto Industry in any aspect relating to the levels of and
reductions in the benefits of General Motors’ and Delphi Corporation’s
employees and retirees. The resolution was reported favorably to the House by
the Committee on Financial Services on July 24, 2009.
The following congressional hearings have been or are to be held in the 112th Congress with
regard to Delphi Corporation:
• The Regulatory Affairs, Stimulus Oversight, and Government Spending
Subcommittee of the House Committee on Oversight and Government Reform
held a hearing on June 22, 2011, entitled “Lasting Implications of the General
Motors Bailout.”
• The House Committee on Oversight and Government Reform will hold a field
hearing in Dayton, Ohio, on November 14, 2011, entitled, “Delphi Pension
Fallout: Federal Government Picked Winners and Losers, So Who Won and Who
Lost?”
The following congressional hearings were held in the 111th Congress with regard to Delphi
Corporation:
• The Health, Employment, Labor, and Pensions Subcommittee of the House
Education and Labor Committee held a hearing on December 2, 2009, entitled
“Examining the Delphi Bankruptcy’s Impact on Workers and Retirees.”
• The Senate Health, Education, Labor and Pensions (HELP) Committee held a
hearing on October 29, 2009, entitled “Pensions in Peril: Helping Workers
Preserve Retirement Security through a Recession.” Bruce Gump, Chairman of
Delphi Salaried Retirees Association provided testimony.
• The Financial Services Oversight and Investigations Subcommittee of the House
Financial Services Committee held a field hearing on July 13, 2010, in Canfield,
Ohio, entitled “After the Financial Crisis: Ongoing Challenges Facing Delphi
Retirees.”

Author Contact Information

John J. Topoleski

Analyst in Income Security
jtopoleski@crs.loc.gov, 7-2290

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