Detroit pensioners would be able to make a lump-sum payment to return money from their annuities under an agreement reached “in concept,” an attorney said in bankruptcy court today.
Judge Steven Rhodes was scheduled to hear arguments on a motion filed by Detroit’s General Retirement System (GRS) that seeks to allow retirees make one-time repayments instead of spreading them out over their lifetimes with 6.75 percent interest tacked on. But Robert Gordon, a GRS attorney, told Judge Rhodes that “The parties have agreed to a resolution in concept to this motion. … There is one issue still sort of out there that needs to be resolved and discussed among the parties. We hope to resolve it today.”
At issue is the Annuity Savings Fund that was available to non-uniform city employees.When employees retired, they had the option of a full pay out or receiving it monthly, according to court filings. Workers who paid into the annuity plan contributed up to 7 percent of their salaries with guaranteed rates of return of 7.9 percent. The pension fund covered the difference between the promised 7.9 percent and the lower, actual return rate, a policy the city contends drew down the pension fund and contributed to its underfunding by millions of dollars.
Under the Plan of Adjustment, which retirees are currently voting on with ballots due back July 11, the city recoups “excess interest” from pensioners by reducing their monthly payments. During town hall and information meetings about the voting, the GRS attorneys say, several pensioners complained about not having the option for a lump sum payback.
Attorneys for the retirement system filed the June 20 motion for the lump-sum option, which was supported by the Official Committee of Retirees.
The city of Detroit objected to the suggestion in a June 24 court filing, arguing that because the GRS has publicly endorsed the Plan of Adjustment, “it is thus disingenuous, at best, a quite a surprise to the City, for the GRS to ask the Court, six weeks after the commencement of solicitation of the Plan, to undo the parties agreement and rewrite the terms of the agreement.”
Some pensioners have said their vote on the Plan of Adjustment depends on whether they have a lump sum repayment option.
Gordon said in court attorneys for the pensioners and the city hoped to reach a full resolution today or Friday. “It would be very important, I think, to announce this resolution before the weekend,” he said. “It could affect voting and voting on going on right now. ”