Detroit Retirees Have Until Tuesday to Decide “Clawback” Repayment Plan As They Grapple With Benefit Cuts


By now, everyone knows about Detroit’s pension cuts – general city workers will be facing a 4.5 percent cut to their pension checks and the suspension of their cost-of-living adjustment.

But there’s another benefit cut that’s flying under the radar, and it affects 6,000 Detroit retirees.

It’s called a clawback, and it mandates that some retirees pay back the city for excessive interest rates it paid on a retirement savings plan separate from the pension system.

Retirees have two options: they can pay back the city in a lump sum up front. Or, they can opt to have the owed money deducted from their monthly pension checks.

Retirees have to decide by Tuesday whether or not to pay the city a lump sum. If a retiree doesn’t make any decision, the owed money will be deducted automatically from monthly pension checks.

The Detroit Free Press today dove into one retiree’s story and the tough choices thousands of city retirees now must grapple with:

Imagine Steve Wojtowicz’s start to the year: Does the city of Detroit retiree hand over $89,000 in a lump sum in the city’s historic bankruptcy? Or does he watch $600 a month get deducted from his pension check to cover money owed back to the city from an annuity savings plan?

If he takes the monthly cut, he’s looking at 6.75% interest and paying $181,000 over 25 years. He plans to tap a home equity loan at about 4% to pay it off. “I’m frustrated every time I start talking about it,” he said.

Wojtowicz is one of about 6,000 city of Detroit retirees who face the dilemma. They took part in a city retirement savings plan — in addition to their regular pension — that paid about $190 million in excessive interest from 2003 to 2013, including a minimum of 7.9% a year. The city’s bankruptcy attorneys said the savings plan was ridiculously generous, including paying employees interest during the meltdown in 2008-09.


It’s called a clawback, and for non-public safety retirees it comes on top of 4.5% cuts to pension checks and the loss of all cost-of-living adjustments (COLA). Police and fire retirees do not face cuts to pension checks but lose half of their annual COLA. Pension checks are likely to start being cut as of March 1 or April 1, the current target dates.

During Detroit’s bankruptcy trial, the city argued that the “clawback” was necessary to limit cuts to pension benefits.


Photo by  Mike Boening Photography via Flickr CC License

Share This Post

Related Articles

Powered by WordPress · Designed by Theme Junkie
Facebook IconTwitter Icon