A revised bankruptcy plan filed by Detroit's emergency manager on Monday would deepen cuts to the benefits of retired members of the $3.4 billion Detroit Police & Fire Retirement System.
If approved by Judge Steven W. Rhodes in a hearing scheduled for April 14, the amended bankruptcy recovery plan would increase the cut to police and fire pension benefits to 6% if employees and retirees approve the plan, or to 14% if the plan is rejected.
The first version of the recovery plan, filed in U.S. Bankruptcy Court in Detroit on Feb. 21, outlined a 4% cut to police and fire system benefits if the plan were approved and 10% if not.
Creditors, including active and retired pension fund members, also have to approve the recovery plan.
Bill Knowling, a spokesman for Kevyn D. Orr, Detroit's emergency manager, did not return a call seeking an explanation for the change.
The new plan did not change benefit cuts for the $2.8 billion Detroit General Retirement System; they remain 26% if participants approve the plan and 34% if they do not.
The city will not have to make contributions to its two defined benefit plans until 2023, contingent upon an agreement among the state, several private foundations and the Detroit Institute of Arts to raise about $820 million to fund the pensions and preserve the city-owned art collection.
The revised recovery plan requires that each retirement system's assets be moved into irrevocable trusts “in order for the retirement system(s) to receive funding from the state of Michigan,” according to the trust agreements in Mr. Orr's latest court filing.
New boards will be established for both city pension plans, consisting of five independent voting members with “expert knowledge or extensive experience” in financial and investment matters or in retirement plan administration or actuarial science, according to the trust agreements. Two non-voting members – one appointed by retirees and one by member unions — will fill out the seven-member boards.
The trust documents do not specify who will appoint the five expert trustees to the boards.