The city of Detroit sued to enforce a 30-year payment period with a plan to end bankruptcy debt. Contrarily, pensioners fought for a 20-year payment with hopes to earn more as many retirees have gone back to work just to make ends meet.
A federal bankruptcy judge on Monday ruled in favor of the Duggan administration’s plan to extend the city’s pension payment obligation for the Police Fire Retirement System over 30 years rather than the requested 20-year span, creating an assured disappointment to city police and fire retirees who want their pension fund to be made whole – sooner than later.
Judge Thomas Tucker ruled in the city’s favor, stating that a 30-year amortization period is “indeed part of the (bankruptcy) Plan of Adjustment and that the Police Fire Retirement System cannot change it.”
The city of Detroit would have paid $12 million more a year under the police and fire retirees’ preferred 20-year amortization period, instead, Mayor Mike Duggan administration said the amount was just – too expensive.
The administration’s plan to stretch out its payments causes a less invasive hit to the city’s budget and allows pension debts to be paid off “sustainably over 30 years,” according to the Duggan administration’s court filing.
The payment plan is part of a city bankruptcy settlement dating from 2014 that allowed Detroit to delay retiree pension fund payments until this year. The city is set to resume contributions to its two pension funds on Saturday.
According to the city, under the bankruptcy plan of adjustment, general workers endured a 4.5% base cut in pensions and the elimination of an annual cost-of-living increase. The pensions of police and firefighters were left alone, but an annual 2.25% cost-of-living adjustment was reduced to about 1%.
Before bankruptcy, first responder retirees received about 82% of their final compensation after 35 years and 62.5% after 25 years. But now, they pay up to an average of 7% of active pay for a smaller multiplier, with the potential of working 30 years and making 60%. At 25 years, they can receive 50%.
Police and fire pensioners are also asking state lawmakers to put another $97 million in their voluntary employees’ beneficiary association (VEBA) in a bid to increase the $120 monthly health care stipend.
The city’s General Retirement System Board spokesperson said in a statement: “The Board Chair expects that the city of Detroit will pay its pension obligations as per the bankruptcy, and the status of Detroit pensioners this year will remain unchanged.”