(The Center Square) – A federal bankruptcy judge approved Detroit’s plan to push the city’s pension payments for the Police and Fire Retirement System over 30 years instead of 20.
Judge Thomas Tucker ruled that “a 30-year amortization is indeed part of the confirmed [Plan of Adjustment], and the PFRS cannot change it.”
Detroit’s bankruptcy was confirmed in 2014, and the POA allowed the city to dodge partial pension payments for 10 years.
The PFRS attempted to reduce the 30-year amortization for Detroit’s payment of unfunded actuarial assumed liability as of June 30, 2023, to 20 years.
On March 4, 2021, the PFRS Board of Trustees adopted a resolution that unfunded actuarial assumed liability existing at the end of June 30, 2023, should be amortized over 20 years.
However, Detroit and Tucker disagreed.
“The (Plan of Adjustment) in this case provides for the very type of injunction that the city seeks here,” Tucker wrote. “As the court has now ruled, the PFRS’s efforts to impose a 20-year amortization is contrary to the (plan).”
“This unambiguously means that the 30-year amortization is part of the confirmed POA,” Tucker wrote. “That confirmed POA must be enforced as written.”
The ruling comes as Detroit will resume a $135 million pension payment made by June 30, 2024, with payments scheduled through fiscal year 2053 with a 30-year amortization.
Detroit Chief Financial Officer Jay Rising welcomed the ruling.
“US Bankruptcy Judge Thomas Tucker’s ruling is appropriate based on the City’s bankruptcy Plan of Adjustment and Confirmation Order as part of the Grand Bargain,” Rising said in a statement.
“The 30-year amortization maintained by the court allows the City to continue with the financial plan we’ve prepared and do so comfortably,” Rising said. “It should be noted that the Duggan administration has made it a priority to plan for the City’s legacy pension payments by setting aside more than $400 million over the last ten years to make sure we protect our retirees. Because of this fund, what was deemed a pension “cliff” payment to begin next fiscal year (beginning July 1st) will now be a ramp over time.”
Detroit says only $73 million of pension payments will draw from the city budget because the Motor City has saved $473 million in the Retiree Protection Fund, a dedicated IRS Section 115 trust.
Detroit’s current and new employees were shifted into two new hybrid plans with defined benefits and defined contribution features, and no further benefits were earned in the two closed plans.
