The board of a group representing 8,000 retired city workers has approved the city’s proposal for pension payments and health care benefits in Detroit’s bankruptcy proceedings. The mediators in the bankruptcy case announced the vote, which was taken by the administrators of The Detroit Retired City Employees Association (DRCEA).
Under the agreement, previously approved by the board of the General Retirement System and the Official C0mmittee of Retirees, city retirees (excluding police and fire) will see a 4.5 percent cut in current pension benefits and a loss of cost-of-living allowances. According to the current proposal, health care benefits for retirees, their spouses and other dependents will be determined and managed by a Voluntary Employees’ Beneficiary Association trust beginning in January. The city will provide the VEBA a note of a $218 million to be “issued to “non-pension, unsecured creditors,” according to court documents the city filed today which also read:
How much the Detroit General VEBA trustees may spend on retiree healthcare in any particular year is unknown at this time. It is also unknown how long the Governance of the VEBA, which will also exist for the police and firefighters system, has been a topic of negotiation for lawyers representing the city and pensioners.
The mediators statement about the DRCEA vote noted “general retirees will have a meaningful voice in the VEBA that is to be established.”
The VEBA was described in today’s court documents that outlined the latest proposal for voting procedures for pensioners and health care beneficiaries:
The Detroit General VEBA will be governed by a board of trustees that will be responsible for, among other things, management of property held by the Detroit General VEBA, administration of the Detroit General VEBA and determination of the level of and distribution of benefits to Detroit General VEBA beneficiaries.
The board will be comprised of retiree representatives and independent professionals, and the composition of the initial board will be approved by the Bankruptcy Court. The Detroit Retired City Employees Association and the Retiree Committee will each be able to appoint Detroit General VEBA board members in equal numbers, and such appointees will constitute a majority of the Detroit General VEBA board; the City will appoint the remaining members.
The board will have the authority to determine who is eligible to receive retiree health benefits from the VEBA, and the annual level, design and cost of such benefits.
While the DRCEA board’s support is yet another milestone in the bankruptcy’s proceedings, the roughly 12,000 retirees eligible for health care benefits still must vote on the agreement. Those ballots will be mailed May 12 and are due back July 11, just 13 days before the confirmation hearing on the city’s bankruptcy plan is scheduled to begin.
Without a confirming vote, by the pensioners, the proposed “grand bargain” goes away. That’s the $816 million that would help fund pensions in contributions from the Detroit Institute of Arts, 12 foundations and the state. Emergency Manager Kevyn Orr was in Lansing this week trying to garner support from lawmakers, but no legislation has been introduced to provide the state’s $350 million share.
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com
Here’s the full text of the latest voting procedures: