Detroit’s New Pension Program: Employees have questions, concerns

Detroit’s New Pension Program: Employees have questions, concerns

As part of the restructuring of Detroit’s finances during the bankruptcy process, there is a new pension program for current and future city workers that requires contributions from the employees. About 100 people attended a city-organized meeting Tuesday where they asked questions and voiced concerns about the plan, how they were notified about it and where it fit in the Chapter 9 timeline.

Hear NextChapterDetroit’s Sandra Svoboda discuss the meeting with WDET News Director Jerome Vaughn.

The city’s Chief Operating Officer Gary Brown said because there were so many questions, there would be a second meeting.

Terms of the new plan maintain parts of a defined benefit system but also require a contribution from current employees, which will be deducted from their salaries beginning July 14. For police and firefighters, the contribution will be 6 percent of their weekly pre-tax base salary, while non-uniform employees in the General Retirement System  will contribute 4 percent. For employees hired after June 30, the contributions will be 8 percent.

Dubbed “hybrid” pension plan by some, the new arrangement has received some national attention as public pension funding is a concern across the country. The Washington Post editorial board, for example, lauded the plan:

To be sure, the Detroit proposal runs counter to the conventional policy and legal wisdom about pensions, which holds that public workers may never be required to accept a downward adjustment in their vested rights, no matter the financial straits of the city or state that employs them. (Private-sector workers enjoy no such presumption.) But this is precisely why the Detroit idea, yet another positive result of emergency manager Kevyn Orr’s stewardship, is welcome.