Detroit Emergency Manager freezing City Pensions and Benefits…(Coming To A City Near You!)
By Andre Damon
September 28, 2013
Detroit Emergency Manager Kevyn Orr announced a plan Thursday evening to freeze the city’s pension system and wipe out benefits for all unvested workers—a significant section of the workforce. Current vested workers—uniformed workers with ten or more years service and non-uniformed workers with eight or more years—will cease accruing additional benefits when the plan takes effect on January 1. Future cost-of-living adjustments for all workers, retired as well as current, will be eliminated.
The move follows the announcement of a plan to eliminate retiree health care benefits, forcing retirees over 65 onto Medicare and giving the rest a subsidy to purchase private insurance.
Orr, backed by Michigan Governor Rick Snyder and the Obama administration, put Detroit into bankruptcy in July, with the aim of slashing workers’ pensions, privatizing city services, selling off the collection at the Detroit Institute of Arts, and shutting down whole sections of the city. Detroit is seen as a model for similar actions throughout the country.
Under Orr’s scheme, the existing “defined benefit” plan, in which workers receive a set amount every year, will be replaced by a 401(k)-style “defined contribution” plan, tying workers’ retirement income to the vagaries of the stock market.
Worst affected by the proposal will be workers whose pensions plans have not yet vested. They will be shifted to the 401(k) plan with no accrued benefits.
The announcement on pension cuts was timed to coincide with the release of a report by the city’s independent auditor, commissioned by Orr, which claims that “questionable practices” and “excess payments” to retirees were major causes of the city’s debt crisis.