June 18 Detroit's emergency manager laid out
plans on Wednesday for changes to the city's two retirement
systems even as bankruptcy proceedings continue.
Kevyn Orr, who was tapped by Michigan's governor in March
2013 to run Detroit, said all current and new city workers will
be subject to the changes effective July 1. The changes maintain
a defined benefit system, but require new deductions from
workers' paychecks for pensions and matching contributions from
"The city and its labor partners have come up with what we
think is the best option to strengthen employee pensions so we
can continue to meet future obligations in a financially
responsible and sustainable manner,"� Orr said in a statement.
He added that the changes resulted from months of "intense
negotiation" with city unions and retirees.
Accrued benefits will be frozen as of June 30 and no new
employees will be allowed to earn benefits under prior General
Retirement System and Police and Fire Retirement System benefit
Detroit's pension systems are a major contributor to the $18
billion in debt and other obligations that led to the city's
historic municipal bankruptcy filing in July 2013. Detroit has
about 22,000 retirees who currently receive pensions, but only
about 9,000 active employees supporting the funds, according to
While Detroit has reached settlements with several major
creditors, voting by thousands of creditors, including city
workers and retirees, on a proposed debt adjustment plan will
not be completed until July 11. Federal Judge Steven Rhodes, who
is overseeing the bankruptcy case, has scheduled an Aug. 14
start date for a hearing to determine if the plan is fair and
The debt adjustment plan includes a reduction or elimination
of annual cost of living adjustments and pension cuts for some
retirees. Money pledged by foundations, the Detroit Institute of
Arts and the state of Michigan would be tapped to ease the cuts.
(Reporting by Karen Pierog; Editing by Eric Walsh)