DETROIT (WWJ/AP) – Detroit is steering thousands of city workers into 401(k)-style retirement accounts and freezing their accrued pension benefits.
The change doesn’t affect police officers and firefighters, whose pension fund is considered to be in better shape than the fund covering other city workers.
The Detroit News reported Monday that state-appointed Emergency Manager Kevyn Orr signed the order Dec. 30. He says freezing benefits will let Detroit put more money into essential services.
Pension fund spokeswoman Tina Bassett calls the freeze “outrageous,” saying the fund isn’t the cause of Detroit’s financial problems.
Detroit is trying to fix its long-term debt in bankruptcy court, where Federal Judge Steven Rhodes last month ruled that pensions could legally be cut as part of the road to solvency.
Orr’s order also eliminates cost-of-living increases for retirees in the general pension fund. Orr has said that Detroit has underfunded obligations of about $3.5 billion for the city’s two pensions funds and $5.7 billion for retiree health coverage.
Gov. Rick Snyder, who approved Detroit’s Chapter 9 filing in July, said he cares about Detroit retirees, but bankruptcy was the only viable option for a city crushed under an estimated $18 billion in long-term debt.
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