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For Detroit retirees hit by bankruptcy "clawback," hits keep coming

Sarah Cwiek
Michigan Radio

Bad news keeps on coming for some Detroit retirees hit by the so-called “clawback.”

They must pay back money the city says they were over-paid through excessive interest on annuity savings funds meant to bolster their retirement income.

For many retirees, that adds up to a lot more than the 4.5% direct pension cuts that general system retirees have to absorb.

It adds up to about a 20% overall cut for Detroit water department retiree and union leader Michael Mulholland, who says those savings were meant to supplement his wife’s income.

“So when I pass away, she’ll be looked after. Now I can’t fulfill that promise,” Mulholland says. “And I’m in a better situation than most.”

Mulholland also says that he and some others who wanted to repay the city what they owe in a lump sum were denied that option based on a technicality. They didn’t check a certain box on a form — even though the entire purpose of filling out the form was to set up that type of repayment.

And in continued bankruptcy court proceedings this week, state lawyers argued that retirees pushed below a certain low-income threshold by the clawback shouldn’t qualify for a $20 million state aid fund meant to help those most harmed by Detroit’s bankruptcy.

It’s unclear how many people that might affect — neither Detroit’s General Retirement System nor the Michigan Department of Treasury, which administers the aid fund, could provide numbers. But a pension fund lawyer told the court supporting those claims would cost an estimated $192,000 annually.

Retiree and pension fund lawyers are expected to fight the state’s position, which Mulholland calls “morally indefensible.”

Pension cuts for Detroit retirees kicked in March 1.

Sarah Cwiek joined Michigan Radio in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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