Management & Labor

2,000 Get Detroit's Pension-Cutting Ballot with Wrong Info

by | May 29, 2014
 

By Joe Guillen

About 2,000 pensioners with a vote on Detroit's plan to cut retirement benefits received ballots with a significant error, a lawyer for retirees revealed in bankruptcy court today. The news did not please U.S. Bankruptcy Judge Steven Rhodes, who requested the identity of the person who made the error.

The error relates to how much money the city wants from some General Retirement System members' annuity savings accounts.

The amount some retirees would repay is supposed to be based on annuity fund transactions from 2003 to 2013, when the pension funds paid excessive interest credits, according to the city. But a couple thousand ballots went out with calculations based on the years 2002-13. The errors mean some retirees are incorrectly being asked to give back more money.

Carole Neville, an attorney representing the official retiree committee, said she is working with the city for a solution. She said new, green ballots have been prepared and will be presented to Rhodes on Friday.

"We need to send out new ballots to those people," Neville said.

Neville said she is not sure whether new ballots need to be sent to all General Retirement System members. She said the voting process already is confusing enough.

"People don't know how to vote and this is going to be an additional confusion," she said.

Rhodes said the mistake could sway voters.

"This is very, very unfortunate," Rhodes said. "It will undoubtedly result in 'no' votes that might've otherwise been 'yes' votes, just because of the confusion and the questions of the reliability of the data that's being provided."

The city's pensioners and retirees started receiving ballots earlier this month to vote on the city's plan to cut pension benefits as part of its restructuring plan. Pensioners are to send their ballots to a California balloting company by July 11.

For members of the General Retirement System, a "yes" vote would mean a 4.5% cut to a monthly pension check and a 15.5% monthly cap on a clawback of what the city sees as excessive interest credits paid to annuity savings accounts. A "no" vote would remove the clawback's cap and increase monthly pension check cuts to 27%. Both options eliminate cost-of-living adjustments.

There would be no cuts to police and fire pension members' monthly pension checks whether members vote "yes" or "no." But a "no" vote would eliminate cost-of-living adjustments while a "yes" would cut those adjustments in half, to about 1%.

Most pensioners in both retirement systems must approve the city's plan to reduce pensions for smaller cuts to take effect. The "yes" votes also must represent at least two-thirds of the amount of pension claims for those who cast ballots.

Rhodes asked Bruce Bennett, a Jones Day lawyer for the city, about who is responsible for the error. Bennett said he did not know. Rhodes said he wants an answer by Friday.

Bill Nowling, emergency manager Kevyn Orr's spokesman, provided an answer on Wednesday.

He of the erroneous ballots, 1,100 were sent to active employees and 1,100 sent to retirees. He said they will all get new ballots and their old ballots will be canceled. He said the mistake was caught in a general review of the ballots that were sent out.

"It was a clerical error that we caught and corrected," Nowling said, adding it is not known how many people had already voted using the ballots with the wrong information.

"It was a failure to communicate," Neville said after the hearing. "It wasn't a willful thing. It was an accident."

(c)2014 the Detroit Free Press

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