Detroit's two public employee pension funds reached separate agreements regarding pension benefit cuts included in the city's revised bankruptcy recovery plan, filed April 1 in U.S. Bankruptcy Court in Detroit.
Trustees of the $2.8 billion Detroit General Retirement System on Wednesday afternoon approved the economic terms of a settlement that will impose 4.5% cuts to retiree pension benefits and eliminate cost-of-living adjustments.
The settlement is a considerable improvement on the 26% pension benefit cut imposed if employees and retirees approve the city's recovery plan and 34% if the plan is rejected in a vote on the pension changes required by the Chapter 9 bankruptcy process.
“We got the best possible deal we could, given the reality we've had to deal with. I think our negotiating team has done a tremendous job protecting as well as they could the pensions of Detroit workers,” said Tina Bassett, a spokeswoman for the General Retirement System, in an interview.
Ms Bassett said some non-economic terms remain to be hammered out by GRS negotiators, including governance and ongoing litigation filed by the pension fund against the city.
Representatives of the $3.4 billion Detroit Police & Fire Retirement System reached an agreement with the city on Wednesday morning on a deal that will eliminate pension cuts and include a 1% annual cost-of-living adjustment. The amount of the COLA might be increased based on good performance of the pension fund, said Bruce Babiarz, a spokesman for the retirement system, in an interview.
Trustees of the police and fire pension fund will decide whether to approve the settlement on Thursday morning.
The deal struck by the Police & Fire Retirement System is similar to the zero pension cut/1% COLA package agreed upon Tuesday morning by the city and the Retired Detroit Police and Fire Fighters Association, but uses a different calculation formula, Mr. Babiarz said.
Current and retired fire and police employees had faced a 6% pension cut if employees and retirees approve the city's bankruptcy recovery plan or 14% if the plan is rejected.
Even if the pension fund boards approve their respective settlements, they must “ultimately be decided on by current employees and retirees who are eligible to cast a ballot in the bankruptcy process to accept or reject the settlement offer,” said a joint statement from the two city pension funds.
Voting by all creditors on Detroit's bankruptcy recovery plan begins May 1.
All three pension settlements are dependent on about $820 million of funding from the state of Michigan, several private foundations and the Detroit Institute of Arts.
Judge Steven W. Rhodes, who is presiding over Detroit's bankruptcy, must also approve the pension settlements. A hearing scheduled for Thursday to review the city's April 1 revised recovery plan might be postponed until another plan revision is filed that includes changes to the pension plans.