Detroit fire, police retirees association reaches deal with city to restore pension benefits

By: Christine Williamson

Published: April 15, 2014 - Pensions & Investments

Detroit reached agreement on Tuesday with the Retired Detroit Police and Fire Fighters Association over cuts to pension and other benefits proposed in the city's revised bankruptcy plan.

Negotiations over pension decreases continued Tuesday between the city and the $2.8 billion Detroit General Retirement System, $3.4 billion Detroit Police & Fire Retirement System and court-appointed official retiree committee over proposed benefit cuts.

The agreement with retired police and firefighters restores full pension benefits and retains a 1% cost-of-living adjustment, according to a message on the RDPFFA's telephone hotline. Further, depending on future performance of the Police & Fire Retirement System, the previous 2% annual COLA could be restored, according to the message.

Under the bankruptcy plan of Kevyn D. Orr, the city's emergency manager, police and fire pension benefits would have been cut by 6% if employees and retirees approve the plan, or to 14% if the plan was rejected.

The proposed cuts will remain in place for active police officers and firefighters if officials of the police and fire pension fund don't reach a settlement with the city.

The RDPFFA represents about 6,500 members, or more than 80% of Detroit's eligible police and firefighter retirees.

On Monday, the city raised the assumed rate of return for the pension funds to 6.75% annually from 6.25%, according to court documents.

“Much more information will be coming, but right now, it looks good for keeping our pensions intact,” said the RDPFFA hotline announcement.

A separate voluntary employee beneficiary association also will be established to provide funds for retiree health care, according to a statement from the Detroit bankruptcy mediators from U.S. Bankruptcy Court in Detroit. Detroit Police & Fire pension fund retirees also will retain a vote on the pension fund's board, mediators said in the statement.

Retired police officers and firefighters still have to vote on the changes to their retirement benefits under the bankruptcy agreement. Approval also is necessary from presiding Judge Steven W. Rhodes of the U.S. Bankruptcy Court in Detroit.

Unless representatives of the Detroit General Retirement System agree to a settlement deal, active and retired employees face deeper proposed pension cuts than those for the police and fire system — 26% if participants approve the plan and 34% if they do not.

“The mediated agreement approved unanimously by the RDPFFA today is contingent upon full funding of the so-called Grand Bargain,” said the mediators' statement, referring to an agreement among the state, several private foundations and the Detroit Institute of Arts to raise about $820 million to fund the pensions and preserve the city-owned art collection.