GM Faces Wrath Of Retirees In Post-Bankruptcy Squabble

Dozens of executive retirees earning more than $100,000 a year in retirement benefits sued General Motors claiming they suffered some unauthorized losses of their benefits after the automaker’s bankruptcy.

The pensioners, including former GM Vice President John G. Middlebrook, are asking a judge to rule that the company violated the federal Employee Retirement Income Security Act and order it to pay past-due benefits with interest, plus legal fees and expenses.

“In erroneously administering” the retirement plan, GM “contravenes the plain text” of the contract, lawyers for the executives said May 9 in a complaint filed in federal court in Detroit. Denial of benefits “constitutes an abuse of the discretion provided” in the plan, and is “arbitrary and capricious,” the lawyers said.

In a Nov. 23 letter included in court filings, plaintiffs’ (GM) lawyers allege that under a modified retirement plan, only benefits of more than $100,000 a year are to be reduced by two-thirds, and not benefits under $100,000.

It isn’t likely that the automaker’s bankruptcy would have been as successful if it was not allowed to reduce retirement benefits to its most highly compensated former employees.  However, any reduction in a retiree’s benefits through bankruptcy must be approved by the bankruptcy court and abide by the bankruptcy code. Failure to seek approval can result in sanctions against the bankrupt company, and fees and damages awarded to any parties that were harmed.  For its part, GM has insisted that the reductions endured by the executive retirees were approved and necessary for them to have a successful bankruptcy exit.

(source: )