Trustees of the $3.4 billion Detroit Police & Fire Retirement System on Thursday morning approved the economic terms of a settlement that will eliminate the pension cuts included in the city's revised bankruptcy recovery plan, filed April 1 in U.S. Bankruptcy Court in Detroit.
Police and fire department employees and retirees also will receive a 1% annual cost-of-living adjustment, down from 2.25% previously. The amount of the COLA might be increased based on good performance of the pension fund, said Bruce Babiarz, a spokesman for the pension fund, in an interview.
The pension fund's 12,000 current and retired fire and police employees along with other creditors must approve the city's final bankruptcy plan of adjustment in balloting that begins May 1.
Under the current revised recovery plan, public safety employees and retirees had faced a 6% pension cut if they approve the city's bankruptcy recovery plan or 14% if the plan is rejected.
The deal struck Wednesday by the Police & Fire Retirement System is similar to the zero pension cut/1% COLA package agreed upon Tuesday by the city and the Retired Detroit Police and Fire Fighters Association.
“Make no mistake, while the proposal calls for no cuts to pensions, it does reduce substantially cost-of-living increases to this group that is not eligible for Social Security. Many active duty police and fire have endured 10% wage cuts in recent years and extended shifts,” said a statement from the pension fund provided by Mr. Babiarz.
The statement went on to warn that “while we are considering the major economic points, it should be clearly noted that there are some 408 pages of detail that remain to be worked on with our restructuring team and the city to arrive at a final plan of adjustment.”
Judge Steven W. Rhodes, who is presiding over Detroit's bankruptcy, must also approve the pension settlements.