Detroit emergency manager "freezes" pension benefits, then backs off -- temporarily

Jan 7, 2014

Detroit emergency manager Kevyn Orr moved to “freeze” pension benefits for some city retirees — then suspended that action as the city and pension fund representatives talk in mediation.

Orr quietly issued that order late last month. It affects members of Detroit’s General Retirement System—not police officers or firefighters, who have their own, separate pension fund.

Retirees and those with vested pensions (at least 10 years of service) would continue to receive checks —but will not receive future cost-of-living increases. Current employees will only receive the amount they’ve earned up to the freeze date.

Those employees whose pensions have not vested would be moved to defined-contribution retiree savings plans.

Orr said in a statement late Monday that “the city remains in a financial emergency,” and can’t afford to continue making contributions to the pension system.

However, Orr temporarily suspended the order at the urging of Judge Gerald Rosen, the federal judge acting as mediator in Detroit’s bankruptcy case.

Orr says he’d give mediation another chance to work, but warned that “time is running short,” and he could reinstate the order at any time

Orr has sought to cut existing pension benefits in bankruptcy, and Judge Steven Rhodes gave him the legal go-ahead to do so last month.

Orr says the city’s two pension funds are $3.5 billion underfunded, a calculation fund officials dispute.