- Police, firefighters and other city workers demonstrated in May 2010 against pension system takeover by private Michigan Employee Retirement System, which was funded at a rate of 50 percent at the time, while Detroit’s $6 billion pension systems were 100 percent funded.
BELOW IS A LETTER FROM SHIRLEY LIGHTSEY, PRESIDENT OF THE DETROIT CITY RETIREES ASSOCIATION (DRCEA), TO MAYOR DAVE BING
July 11, 2012
SUBJECT: “City Employment Terms For All Non-Uniform Employees”
Dear Mayor Bing,
The Detroit Retired City Employees Association (DRCEA) has reviewed the “City Employment Terms For All Non-Uniform Employees” Agreement that was recently distributed to the civilian employee unions of the City of Detroit. After thorough review, the DRCEA is outraged and vehemently opposedto the proposed attempt to change the composition of the General Retirement System Board of Trustees. The changes that are contained in this document represent, (as described below) a radical power play to wrest control of $2.4 Billion dollars of Trust Fund assets under management by the Board and to manipulate the takeover that could ultimately undermine the entire System.
- Detroit Mayor Dave Bing and Program Management Director Kriss Andrews, both proponents of assault on city’s pension systems. Both Bing’s company The Bing Group and Andrews’ former employer Energy Conversion Devices went bankrupt, ECD in February, 2012.
This idea now follows the ill-fated attempt in 2010 by the Bing Administration to transfer both the General and Police & Fire Retirement Systems to the Municipal Employees Retirement System (MERS) – a system that is severely under-funded in comparison to both Detroit Retirement Systems, charges excessive administrative fees, and imposes iron-clad restrictions if a municipality wishes to exit at any time.
The effective date of the General Retirement System is July 1, 1938, when a governing body was created to administer, manage, and conduct the operations of the System. There was never any consideration given to change the representative membership of the General Retirement System Board of Trustees when major Charter revisions were adopted in 1974, 1997, and 2011. The Board of Trustees, (as described below) has continually performed their duties as fiduciaries to the System, the members, and the City ofDetroit. They represent the City administration, the citizens of the City of Detroit, active and retiree members; and, have always acted in the best interest of the Plan.
- Thousands protested Gov. RIck Snyder’s presence in Benton Harbor last year, calling him a DICTATOR. Snyder and corporate backers are behind PA4, Detroit consent agreement, CET, and attack on Detroit’s pension systems.
There has never been any individual control or majority rule by one party-in-interest; however, this will change if the new Board design is implemented. The Mayor would control seven (7) of the eleven (11) seats through appointment which will tilt the balance of power on the Board. Governance of the Trust cannot be administered in the form of a dictatorship whereby one individual, or those appointed by that individual, monopolize the decision making process that affects the lives of thousands of current and former employees.
- AFSCME city workers protest Bing attack on pension systems.
Although unsuccessful, recent experience under a prior Administration with pay-to-play, bribery, indictments, favoritism, Federal grand jury and SEC investigations should clearly dictate that no one person or Administration should ever hold the type of power that is being proposed here. In addition, to place control of the pension system in the hands of any one Trustee destroys the concept of independence and undoubtedly is a violation of the requirements set forth in Public Act 314. A balance of power that has worked until now should continue. Therefore, there is no rational justification to even consider such a structural change to the composition of the Board that could have serious detrimental consequences.
The current General Retirement System Board of Trustees, as described in Article 11 Retirement Plans, Sec.11-103 Principles Applicable in Administering Plans of the Detroit City Charter, consists of:
- The Mayor
- A City Council member selected by that Body
- The City Treasurer
- Five (5) members of the retirement system, to be elected by the members of the retirement system under rules and regulations as may be adopted by the Board; except that not more than one (1) trustee shall be elected from any department,
- A citizen of the City who is neither an employee of the city nor eligible to receive benefits under the retirement system, appointed by the Mayor, subject to approval by the Board; and
- One (1) retirant, receiving benefits under the retirement system and elected by retired city employees under procedures established by ordinance.
The proposed change to representation on the General Retirement System Board of Trustees is:
- The Mayor, ex-officio or designee
- The President of the City Council, ex-officio
- The City Treasurer, ex-officio
- The Budget Director, ex-officio
- The Finance Director, ex-officio
- The Human Resources Director, ex-officio
- Three members of the retirement system to be elected by the members of the retirement system, under such rules and regulations as may be from time to time adopted by City Council, except that no more than one trustee shall be from any one department.
- The Mayor, shall appoint, subject to the approval of City Council, as a trustee, an individual with a background in investment and/or municipal finance.
- The Mayor shall appoint, subject to the approval of the City Council, a retiree who is receiving benefits under the retirement system.
Following are several critical matters of concern that can be affected by the change in the representation on the Board of Trustees. These actions can be easily manipulated when the balance of power is so one-sided.
- Enforcement of timely contribution payments to the Plan. The City has failed to make their required contribution on numerous occasions to both the General and Police & Fire Retirement Systems. Both Boards have filed “demand payment” lawsuits in the past and have always been successful, whereby the City was ordered by the Court to make an immediate payment to the Fund or establish a payment arrangement that included penalties and interest. If the administration controls the General Retirement Board, the collection effort may be delayed or never enforced.
- Establishing the actuarial assumptions and funding levels, the wage inflation factor, and smoothing of gains/losses. Control of these decisions can have a material affect on the health of the overall Plan.
- Selection of Board actuary, auditor, investment managers, consultants, and other service providers.
- Control of duty & non-duty disability process.
- Control of Employee Benefit Board that approves health care rates and administers the Death Benefit Fund.
- Possible loss of the Internal Revenue Service qualified Plan status that could ultimately result in tax consequences to retirees and active members’ annuity loans.
Even though efforts are being made to control the severe financial distress of the City of Detroit under the Financial Stability Agreement negotiated between the Governor, State Treasurer, Mayor, and City Council, restructuring the Board of Trustees will in no way solve those problems. It is the DRCEA’s belief that all parties to the Financial Stability Agreement should direct their efforts at working togethe budgetary problems of the City rather than causing fear and anxiety among members of the Retirement System.
Specific to the changes that are cited above, the DRCEA is profoundly troubled by the proposal to take away the rights of all retirees (approximately 11,900, which includes 5600 Detroitresidents) to elect their independent representative on the Board of Trustees. Citizens in this country have fought and died for the opportunity to vote and let their voices be heard through the election process.
The proposal to allow the Mayor to choose the retiree representative will take that right away from retirees for no logical reason. The retiree representative will now perform his/her duties under the influence of the Mayor and be governed accordingly. This cannot and must not happen. The DRCEA will take whatever legal steps are necessary to continue the practice of electing a retiree representative and make every effort to support that individual’s total independence to act as a fiduciary in the best interest of all members and the System. We will rally our members if necessary, coordinate our efforts with all unions, and stop this attack on our retirement system.
Sincerely,
Shirley V. Lightsey
President – DRCEA
Cc: Detroit City Council, City Clerk, General Retirement System Board of Trustees, City of Detroit Civilian Unions
VOD: this letter was sent prior to the presentation of an even more stringent CET to City Council July 16, 2012. Click on City CET Council Discussion Document 2012-07-16_1_5 for full CET.
For additional info, click on:
http://michigancitizen.com/retirees-fight-b-takeover-p8513-1.htm (article by this author)
http://www.crainsdetroit.com/article/20120720/FREE/120729993.
