DETROIT, Aug. 4, 2022 /PRNewswire/ — The Police and Fire Retirement System of the City of Detroit affirmed its support of a 20-year amortization for pensioners and the City Administration’s funding for the Retirement Trust Fund to support both first responder and general retiree pensions, it was announced today.
“The PFRS has a fiduciary obligation is to ensure that benefits are paid to retired police, firefighters and their beneficiaries. Further it is our job as a Board to ensure the system’s funds are properly invested and managed to provide for future funding,” said Chairman Dean Pincheck. “Trustees have heard from our actuarial and other financial advisors that have run numerous what-if scenarios based on multiple funding models including 30-year, 20-year and others. The 30-year model may be better for city budgets but is not in the best interest of retirees,” Pincheck said.
“We understand the fiscal position of the administration as the reason for the filing with the U.S. Bankruptcy Court to request a 30-year amortization of pension funds vs. 20-years,” said Pincheck. “We believe the Board of Trustees vote in support of the recommendation of the PFRS Investment Committee to favor a 20-year repayment vs. 30-years was and remains the correct position on this matter.”
On Wednesday the City’s legal department filed a lawsuit with the U.S. Bankruptcy Court to request the court order a 30-year amortization vs. 20 years. The city said it was obligated to make the filing to best prepare for what Mayor Mike Duggan called the “pension cliff” when the city is required to resume pension payments in July of 2023 for the Fiscal Year 2024 budget.”
Pension funding has largely been under a hiatus for most City pension obligations since the 2014 U.S. bankruptcy. The fact that the City is planning to add $90 million into the Retirement Trust Fund this year is very welcome news, Pincheck said. He added that the Police and Fire Pension Board of Trustees has approved adoption of a funding policy for a 20-year time frame to pay down the plan’s underfunded status rather than a 30-year amortization as favored by the City to avoid the added pension funding.
The City administration, to its credit, has been saving money in a special Retirement Trust Fund specifically for making its payments to the system when its payment obligation resumes on July 1, 2023. To date the City has placed $355 million in the fund for both PFRS and General Retirement System beneficiaries. An additional $90 million has been approved for investment in the fund.
The City administration proposes using a 30-year time frame to calculate the amount to pay down the underfunding of the pension system while the PFRS and its Investment Committee have approved a 20-year funding scenario.
SOURCE Police and Fire Retirement System of the City of Detroit
