Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
No Pension Cuts For Detroit's Uniformed Retirees
Author: Joel R. Glucksman
Date: April 29, 2014
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One of the biggest obstacles to the successful resolution of the Detroit bankruptcy filing so far has been opposition from pensioners, who represent a significant portion of the city’s debt.
In an unexpected announcement April 15, Gerald Rosen, Detroit’s bankruptcy mediator, revealed that the city has reached a deal with the Retired Detroit Police and Fire Fighters Association, in which pensioners will receive almost no cuts in monthly pension checks and would keep “almost half” of annual cost-of-living adjustments, according to the Detroit Free Press. This latest agreement, which comes on the heels of separate deals with two global banks and unsecured bondholders, could help the city to emerge sooner from bankruptcy than expected.
The Association also agreed to support the creation of a Voluntary Employee Beneficiary Association, which would manage retiree health care, according to USA Today. The retiree association agreed to support the city’s restructuring proposal on the condition that Michigan contributes the $350 million that it has promised as part of the “grand bargain” to protect the Detroit Institute of Art. The deal requires retirees and active vested pensioners to vote individually as to whether they will relinquish their right to pursue lawsuits over pension cuts against the state of Michigan. For any deal to receive enough support to pass, it will need the retirement systems and the Official Committee of Retirees to recommend a “yes” vote to pensioners.
Detroit police retiree Mustafa Abdur-Rahman, 52, told the Free Press that he’s ready to agree to the deal.
“I’d say I’m thrilled about it,” Abdur-Rahman, who receives a monthly check of about $3,500, told the news source. “If I know what I’m working with up front, I can adjust what I’m doing. It’s like a Social Security check: I’ve never heard them cutting a Social Security check, but if they’re going to cut the cost of living, I can take that.”
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