Detroit Pension Cuts In Orr-der

Detroit bankruptcy is a go so now the question becomes how much retirement benefits will be cut.  Emergency manager Kevyn Orr provided some clues in these pension-related excerpts from his press conference today:

.

.

Based on these remarks my original timeline prediction changes a bit:

1. 50% pension cuts will take place March 1, 2014 instead of January 1, 2014; and

2. The cuts will not be across the board.  I expect a:

  • Cap on annual payouts per individual ($50,000?)
  • Sliding scale reductions with no cuts below a certain dollar threshold ($10,000?) for those with a certain numbers of years of service (25?)
  • Freeze on future benefit accruals for active participants.

3. Chicago will be next

11 responses to this post.

  1. Still, severe compression is better than across the board for lowest.

    Reply

    • Could use this compression thought to stabilize Social Security, along with taxing all income…..?

      Reply

      • Posted by Tough Love on December 3, 2013 at 9:56 pm

        Social Security ALREADY does this by paying a lower payout per $1 of contribution as your income rises.

        SS is actually quite a lousy deal for earners consistently at the annual maximum wage base….unless you have a few non-working spouses that will also be collecting (w/o contributing) on your work-record..

        Reply

        • Thanks for the info. Had thought only Medicare premium portion was raised a bit.
          Still, any progressive taxing is better than the NJ school property tax!..

          Reply

          • Posted by Tough Love on December 4, 2013 at 12:01 am

            The answer to NJ’s property tax problem is for Taxpayers to DEMAND that ALL public Sector worker pensions be reduced (for FUTURE Service) to a level no greater than what comparable Private Sector Taxpayers typically get from their employers………a 3-5% of pay u contribution into a 401K Plan.

            Doing so would require a 50-75% REDUCTION in future accruals in NJ’s Public Sector pensions….one of the biggest drivers of our excessive Property Taxes.

          • Question: What is the comparable private sector pension of a police officer?

          • Posted by Tough Love on December 12, 2013 at 3:12 am

            Well,

            (a) Police are not even listed in the Federal Gov’t listings of the 10 most dangerous occupations… with the more dangerous making FAR FAR less money (and likely only 401K pensions)
            (b) Many Police officers do not have college degrees and in only some areas is it a condition of employment
            (c) a recent study indicated that the average police officer has an IQ of 104 (just slightly above the national average)

            In most NJ towns an officer with 5-7years of experience is making $110-$125 in BASE PAY. With overtime, the value of current benefits, and the TRUE value of pension & retiree healthcare accruals, their total compensation is roughly $200K.annually.

            With the listed qualifications, it is highly unlikely they would make even half of that in the Private Sector…. not withstanding all the bravado!

    • Posted by Tough Love on December 3, 2013 at 10:03 pm

      I agree, as long as the age at retirement and years of service are properly factored into the rules.

      E.G.,while reducing the $20K annual pension of a 35-year worker retiring at age 65 without Social Security would be a bad idea, I have no problem at all seeing a reduction in the $20K pension of a 20 year worker retiring at age 55 (even w/o Social Security).

      Reply

    • Posted by Tough Love on December 3, 2013 at 10:03 pm

      I agree, as long as the age at retirement and years of service are properly factored into the rules.

      E.G.,while reducing the $20K annual pension of a 35-year worker retiring at age 65 without Social Security would be a bad idea, I have no problem at all seeing a reduction in the $20K pension of a 20 year worker retiring at age 55 (even w/o Social Security).

      Reply

  2. Posted by Anonymous on December 4, 2013 at 2:29 pm

    With the bankruptcy allowing Detroit to start anew– will the city still be providing DB plans, Cadillac life time health plans and retirement at age 55 with raises every year?

    Reply

  3. Chicago will be big. No one can say that Detroit was taken down by public employee pensions. As the judge noted, that city should have gone bankrupt years — decades — ago.

    Chicago is booming. It’s problems are strictly governmental, not economic.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: