Detroit retirees who lost money in the city’s bankruptcy now set to get one extra check

• Extra check for hundreds of dollars heading to city of Detroit retirees soon.
• City retirees have pushed for years for relief, as Detroit’s financial situation has improved substantially since the bankruptcy.

City of Detroit retirees, who faced serious cuts to their pensions in Detroit’s bankruptcy more than 10 years ago, received some good news Friday when they learned that they’re now expected to receive a bonus check on May 1.

It’s uplifting news, some retirees said, as many are still struggling after the city’s bankruptcy left them with far less money than they would have received otherwise. It’s the first such benefit for retirees since the city exited bankruptcy in 2014.

It doesn’t come anywhere close to covering all the losses that retirees faced. But it is welcome news for many, nonetheless.

City of Detroit retirees, like other seniors on a fixed income, are dealing with higher prices after a spike in inflation and remain concerned about their personal financial picture.

It’s not a huge amount of money — but it is cash.

The current estimate is that some $466 or so will be paid to retirees covered by the General Retirement System and an estimated $653 will be paid to retirees covered by the Detroit Police and Fire Retirement System, according to John Naglick Jr., chief deputy CFO for the city of Detroit and finance director-controller. The exact dollar amount for either check is not known at this time.

Thousands of city retirees set to get extra payment

About 32,000 active and retired city workers at the time of the bankruptcy saw retirement benefits reduced in some fashion as part of the bankruptcy’s plan of adjustment to deal with overwhelming debt.

As of last June, Naglick said there were 10,713 retirees and beneficiaries in Detroit’s general pension system and 7,647 retirees and beneficiaries in the police and fire system. Naglick also serves as a trustee for both pension boards.

The extra money will be paid as a supplemental payment to those receiving pensions as of April 1, 2025. Many Detroit retirees receive direct deposit of their pension payments each month and would receive the extra check that way or via a payment card.

Naglick shared more information and details on the checks with retirees at the retiree task force meeting at 11 a.m. Friday.

City retirees have pushed for years for some financial relief, including the possibility of an extra check, as Detroit’s financial situation has improved substantially since the bankruptcy.

As part of the Free Press bankruptcy team in 2013-14, I interviewed many retirees who were incredibly stressed out by the deep cuts that they faced in pension payouts.

One cut alone in the bankruptcy plan of adjustment eliminated all cost-of-living raises for those in the General Retirement System that could have proved useful for boosting monthly pension checks during times of high inflation in the past few years.

Retirees covered by Detroit’s general system saw a 4.5% cut to their monthly pension, the elimination of future cost-of-living adjustments and higher health care expenses as part of the bankruptcy agreement. Those who saved in an annuity savings plan saw additional, sizable cuts, too.

Police and firefighter pensioners did not see upfront cuts to their pension checks. But they saw their 2.25% annual cost-of-living adjustments reduced to about 1%. Police and fire also saw cuts relating to health care.

City budget committed $10 million to extra checks

Detroit Mayor Mike Duggan announced in March 2024 that he wanted to commit $10 million in the city’s 2025 fiscal year budget toward a one-time supplemental bonus to retirees, known as a “13th check.”

The supplemental payment is called the 13th check since annual pension benefits are typically paid in 12 monthly installments.

“It’s a start, letting them know the city is taking lead to provide some relief to our retirees,” said Councilman Fred Durhal III, chair of the budget, finance and audit standing committee, in March 2024.

The $10 million set aside will be split as $5 million for the General Retirement System and $5 million for the Detroit Police and Fire Retirement System.

Jeff Pegg, the chair of the Detroit Police and Fire Retirement System, said the system is “pleased to make this supplemental payment to retirees as quickly as possible.”

“First, we want to ensure the payments are calculated accurately and disbursed to all retirees by direct deposit and our staff is working diligently to make that happen,” Pegg said.

He added that the city treasurer is expected to wire transfer the funds to the retirement systems in March.

Pegg noted that some 30-45 days is needed to determine eligibility for extra payments and enter amounts into the system for the direct deposit to beneficiary bank accounts.

He said the payments will not actually be a 13th check but added to regular monthly bank wire deposits for members.

Retirees who attended the meeting Friday expressed continued frustration about the cuts they took.

Many retirees said Friday that they still want to see a restoration of more benefits, including addressing a painful clawback of money from an annuity savings plan. Not all retirees had set aside money in that plan but an estimated 6,000 who did lost a great deal of what they had thought would be retirement savings as part of a recoupment of money.

Detroit’s bankruptcy team maintained at the time that the clawback was necessary to prevent deeper cuts in pension checks being received by all pensioners.

Over the past several months, many retirees were upset that they had to wait to receive the extra money, first proposed a year ago by Duggan, to cover bills and other expenses.

“It is without question that the retirees took the largest hits,” Naglick said Friday.

The mayor proposed the extra checks in March 2024. Detroit city council approved the payment at its December 2024 meeting.

But Naglick explained Friday that the bankruptcy court had to grant approval before any extra money could be issued to retirees, who were creditors in the bankruptcy. A 13th check was no longer allowed as part of the bankruptcy’s plan of adjustment to deal with $18 billion in debt.

As part of the bankruptcy case, it was disclosed that pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — including the 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.

Pension fund trustees at the time disputed Detroit emergency manager Kevyn Orr’s figure for unfunded pension liabilities at $3.5 billion. Trustees said the pension funds were healthy despite the 13th check practice and a string of poor investments over the last decade.

More: 10 years later, Detroit retirees find health care, bankruptcy cuts troubling

Detroit filed for bankruptcy on July 18, 2013. The city officially exited its Chapter 9 bankruptcy on Dec. 10, 2014.

But the bankruptcy case remains open, Naglick said Friday, and that’s why the issue had to go before the U.S. Bankruptcy Court in the Eastern District of Michigan.

On March 6, U.S. Bankruptcy Judge Thomas Tucker, who was appointed in early 2015 to oversee the wind-down of Detroit’s bankruptcy case, approved a modification to the bankruptcy plan and issued an order that was in favor of the bonus check. The city is 100% prefunding the extra payment.

Naglick noted that no other creditors filed objections to the extra payment for retirees.

More money could be on the way for retirees. Duggan’s last budget presentation as the city’s chief executive included plans to allocate another $10 million for a second supplemental retirement check for the second consecutive year. But that extra payment would have to be approved by city council and the bankruptcy court, if the case continues to remain open.

Naglick could not estimate when a second payment might be available to retirees.

For the 11th straight year, Detroit will finish the fiscal year with a surplus, Duggan said in his final budget address on Feb. 28. Duggan is not seeking reelection in 2025. Duggan announced that he will be launching a run as an independent for governor of Michigan in 2026.

“The day of my first budget presentation, half the streetlights in the city were out, the parks were all closed, the ambulances didn’t show up for an hour and there were 47,000 abandoned houses in this city. It was a city that didn’t have a lot of hope. It is a very different city today,” Duggan said on Feb. 28.

Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X @tompor.