Money in Detroit’s pension fund was misspent on bonus checks, The Detroit News’ Robert Snell reported.
That information is coming from a report on the city’s General pension fund from consulting firm Conway MacKenzie. According to the report, more than $532 million was distributed as bonus checks over the last two decades, instead of staying in the pension fund’s coffers.
The so-called 13th checks — or annual bonuses — weren’t a part of the city’s pension plan. Yet, the report claims that even in the “good and bad years,” the money intended for the workers’ saving plans was doled out early -- which according to the report, was “effectively robbing (the General pension fund) of precious funds necessary to support the traditional pensions the city had promised.”
From Snell’s article:
In 2009, for instance, when the pension fund lost 24 percent of its value, workers earned 7.5 percent on their savings plans — a payout the consultant called “egregious” and “an abuse of discretion.”
Released in July, the consultants’ report may now give reason for Emergency Manager Kevyn Orr to take over Detroit’s pension funds.
“We are looking at all of these options and, clearly, the 13th check and annuities have created a tremendous drain on the pension funds that was not anticipated, nor is it sustainable,” Orr spokesman Bill Nowling said.
Orr has cited the depletion of the city’s retirement funds as one of the major causes of Detroit’s bankruptcy filing. On July 18, the city filed for Chapter 9 bankruptcy protection, becoming the largest municipal bankruptcy case in U.S. history.
- Melanie Kruvelis, Michigan Radio Newsroom