Detroit pensions | Pension360

A leaked executive order from Detroit’s Emergency Manager revealed Monday that, as of last week, pension funds for many city workers will be frozen and replaced with a 401k-style plan.

The freeze, which was ordered by city Emergency Manager Kevyn Orr and took effect December 31^st, pertains only to Detroit’s General Retirement System, which covers around 19,000 non-public safety workers.

The freeze closes the fund to any new or re-hired workers, halts benefit accruals for current workers and stops worker contributions to the fund. It also ends cost-of-living adjustments for the fund’s 12,000 retirees.

To replace the frozen fund, Orr ordered the creation of a defined contribution plan that all affected workers now have access to.

Tina Bassett, the spokeswoman for the General Retirement System, said in a statement that the freeze was “an outrageous and over-zealous action.”

Just hours after news broke of an order to freeze some workers’ pensions, Detroit Manager Kevyn Orr is eating his words.

Earlier today, Reuters received a copy of an order issued last week by Orr ordering the freezing of the city’s General Retirement System fund, which halted accrual of benefits and closed the plan to new employees.

But now, Orr says he is holding off on the freeze to allow more time for mediation between representatives of Detroit and the city’s pension funds in federal bankruptcy court.

Orr stated he is putting the freeze on hold indefinitely, but he reserved the right to reinstate it at any time.

If the freeze is reinstated, affected workers will have access to a savings plan styled after a 401k plan.

Details, from the Detroit Free Press:

Instead of pensions, Orr’s order said the city would create a 401k-style savings plan…Under [the proposal] by Orr, the city would no longer pay into pension plans but would contribute an amount equal to a percentage of workers’ base pay — 5% for non-uniformed workers and 10% for police and fire — into retirement accounts. Employees also could contribute their own money into the accounts.

Orr ordered the freeze initially because he was frustrated by lack of progress in mediation between the city and its pension funds.

“Time is running short, and the city’s financial status remains dire,” Orr said after he rescinded the freeze order. “An additional delay without the prospect of a mediated solution threatens to further erode essential services and public safety.”

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Detroit Emergency Manager freezes city pension funds

Detroit Emergency Manager backtracks on pension freeze