Jan 6 Detroit Emergency Manager Kevyn Orr on
Monday delayed a move to freeze the pension fund for some of the
city's workers just hours after the order became public, saying
a delay would allow for mediation with the city's retirement
funds to play out.
Orr had issued the order on Dec. 30, with an effective date
the following day, but it did not come to light until Monday
when pension officials criticized the move. The document was not
posted on a web page where Orr's other executive orders have
been since taking over Michigan's biggest city in March.
Despite the delay, Orr said he reserves the right to
retroactively freeze the General Retirement Fund, which covers
non-public safety workers, retroactive to Jan. 1 if mediation
fails to produce an agreement on a $3.5 billion unfunded pension
liability the city "cannot afford to pay."
"The city remains in a financial emergency, and to the
extent that mediation can assist in finding a way to improve
services for all of its 700,000 residents, then it is worth
continuing," Orr said in a statement.
He added that "an additional delay without the prospect of a
mediated solution threatens to further erode essential services
and public safety."
Earlier on Monday, a spokeswoman for Detroit's General
Retirement System blasted Orr for ordering the pension freeze in
the wake of mediation ordered by a U.S. Bankruptcy Court judge,
who is overseeing the city's historic municipal bankruptcy
"This is an outrageous and over-zealous action from the
(emergency manager's) office," Tina Bassett, the spokeswoman,
said in a statement. "Again the (emergency manager's) office
demonstrates a lack of integrity and willingness to make a good
faith effort when negotiating with our pension system."
The pension freeze called for closing the pension fund to
any new or rehired employees and stopping benefit accruals for
current workers. It also stopped worker contributions to the
pension and annuity savings funds and ended cost-of-living
adjustments for pension payments made to retirees.
As of Jan. 1, the order created a 401(k)-type defined
contribution plan for affected workers.
Detroit's pension systems, made up of the general retirement
and police and fire funds, are a major factor in the more than
$18 billion in debt and other obligations that led to the city's
historic municipal bankruptcy filing on July 18. Detroit has
approximately 22,000 retirees who currently receive pensions,
but only about 9,000 active employees supporting the funds,
according to Orr's office.
The pension funds have filed an appeal with the U.S. Court
of Appeals for the Sixth Circuit, hoping to overturn Judge
Steven Rhodes' Dec. 3 ruling that the city was eligible for
Chapter 9 municipal bankruptcy.