Delphi looks to extend IRS pension plan funding waiver to March 31

By Caroline Salls

Pittsburgh, Feb. 25 - Delphi Corp. is seeking an extension to March 31 of its pension plan funding waivers granted by the Internal Revenue Service to avoid a potential more than $1.4 billion excise tax claim for the pension plan year ended Sept. 30, 2006, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The pension funding waivers are currently set to expire if Delphi does not emerge from bankruptcy by Feb. 29.

If the waivers do expire by the current deadline, Delphi said it could face the more than $1.4 billion total potential excise tax claim.

The company is also requesting court approval to increase the $150 million in outstanding letters of credit it has issued to the Pension Benefit Guaranty Corp. in connection with the IRS funding waivers by $10 million.

According to the motion, since Delphi filed for Chapter 11 bankruptcy, it has been making "normal-cost" contributions to its pension plans, which are contributions for amounts related to service provided by plan participants after the bankruptcy filing.

These normal-cost contributions are less than the minimum funding, and, if additional amounts are not contributed within 8½ months after the end of the plan year for which the contributions are due, an accumulated funding deficiency arises.

Although the company said it disputes the IRS' ability to levy the excise tax penalties, Delphi said it applied to the IRS and the PBGC for pension funding waivers.

On May 1, 2007, the IRS agreed to grant pension funding waivers that extended the June 15, 2007 funding deadline for the plan year ended Sept. 30, 2006, avoiding any accumulated funding deficiency for that year.

The IRS also agreed to settle its excise tax claims for the plan year ended Sept. 30, 2005 in exchange for company's commitment to make a $10 million accelerated contribution to its hourly plan when it emerges from Chapter 11.

Delphi also agreed to make a second $10 million contribution to the hourly plan as partial pre-payment of its post-emergence minimum funding obligations.

When the court approved the initial funding waiver in May 2007, it also gave Delphi permission to issue $150 million in letters of credit to the PBGC.

A hearing is scheduled for Feb. 26.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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