May 30, 2014 at 5:27 pm

Orr: Some Detroit pensioners to benefit from bankruptcy ballot error

Detroit Emergency Manager Kevyn Orr said Fridaythe city's plan to correct the problem will result in 1,300 pensioners getting no reductions in their monthly checks than the original ballots, which were mailed the week of May 12. (John L. Russell / Special to Detroit News)

Mackinac Island — Detroit will resend bankruptcy voting ballots to 2,000 retirees because of an error in calculations to pension changes, resulting in $15 million less being recouped by the city, Emergency Manager Kevyn Orr said Friday.

The city sent the retirees ballots with detailed cuts to the individual retiree’s pension that accidentally added six months to a 10-year time period Detroit is using to recoup excess interest earnings paid out to retiree savings plans, Orr said.

Orr said the city’s plan to correct the problem will result in 1,300 pensioners getting no reductions in their monthly checks. The original ballots were mailed the week of May 12.

“Of those ballots that went out, the majority of them will not have no (annuity) savings fund recovery, so it’s actually a benefit to … all of the 2,000 ballots that went out,” Orr told reporters Friday after speaking at the Detroit Regional Chamber’s policy conference on Mackinac Island.

The remaining 700 retirees in the General Retirement System will get new ballots with proposed monthly pension cuts of $48 less than detailed in the first ballot, Orr said.

“Even though it was a mistake, it was a mistake that will result in the benefit for those 2,000,” Orr said.

Gov. Rick Snyder expressed disappointment Friday about the ballot error.

“That wasn’t a good situation to have happen, and it needs to be corrected,” Snyder told reporters at the end of the Mackinac Policy Conference.

City bankruptcy attorneys disclosed the error Wednesday during a court hearing in Detroit.

U.S. Bankruptcy Judge Steven Rhodes called the error “very, very unfortunate.”

“It will undoubtedly result in ‘no’ votes that might otherwise have been ‘yes’ votes,” Rhodes said.

The judge wanted to know who the culprit is.

Orr said Friday “everybody” involved in calculating individual retiree ballots was responsible for the error.

In an effort to keep overall pension cuts low, the city’s debt-cutting plan seeks to recoup up to $239 million from GRS retirees who had active annuity savings fund accounts between July 2003 and June 2013.

Orr and city consultants contend the retirees were improperly paid out interest earnings that exceeded actual investment returns -- even in years when the pension fund lost money.

In 2009, for example, the GRS posted a 24.1 percent loss, but the pension fund’s trustees deposited a 7.9 percent gain in the workers’ annuity accounts, taking the money out of the overall pension funds.

“The money that they were taking, they were taking out of the general fund of the GRS pension to fund the alternative savings,” Orr said Friday during a speech at the Mackinac Policy Conference.

Officials have said the annuity clawback affects nearly 5,000 retired and active workers. The amounts vary, depending on the highest value of a retiree’s account during the clawback period.

The annuity cuts are capped at 15.5 percent, in addition to a 4.5 percent base pension cut proposed in Orr’s plan of adjustment.
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Staff Writer Robert Snell contributed.