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Pension Wars
Detroit Freezes Pensions, Ditches Defined-Benefit Plans

Last month’s ruling that Detroit could reduce pensions in bankruptcy was a major setback for the city’s unions, but the latest defeat may be even bigger. Detroit’s Emergency Manager Kevyn Orr has frozen the pensions of all public workers in Detroit, with the exception of police and firefighters. New city employees will be placed in a defined-contribution plan along the lines of a 401(k), as reported by the Detroit News (h/t Zerohedge).

Given Detroit’s dismal finances and our stated preference for defined-contribution pensions, we see this more as a potential boon for future city employees  than as a bust for the city’s unions (although it certainly is that, too). Future municipal workers won’t have to worry about financially illiterate and/or corrupt pols looting their retirement accounts or filling them with worthless promissory notes.

It remains to be seen how much precedent Orr’s move will carry for other distressed cities. Few of them are being run by emergency managers, and the specific powers, or even the existence, of these managers varies from state to state.

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  • Peripatetic

    “Given Detroit’s dismal finances and our stated preference for defined-benefit pensions…”

    Perhaps we need a MOOC on proofreading?

  • Gene

    You mean your preference for defined contribution plans, right?

  • Pete

    Pity the police and firemen were exempt. Although they might think otherwise, the are not privileged characters.

    • TommyTwo

      Pipe down, civilian.


      • Pete

        If you say so “master.”

  • Jim__L

    High expectations meet falling capacity — it’s always ugly.

    Hm, “we see this more as a potential boon for future city employees”… that’s tremendously euphemistic of you. I think the only way to get hold of a “boon” for future employees would be for the courts to put the previous employees in the same position as those future employees, considering those “future employees” will always have their expectations curtailed by overgenerous promises.

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