Detroit's Bankruptcy Ruling and its Relevance to SDCERS

Date: Dec 05, 2013


The recent bankruptcy ruling in Detroit has generated considerable speculation about its potential impact on pension benefits for California public employees. SDCERS expects no immediate threat to member pension benefits as a result of the Detroit ruling, nor is there any indication of such a threat in the foreseeable future.

The presiding judge in the Detroit bankruptcy case found that Detroit could proceed under bankruptcy because it had shown that it was legally insolvent. In other words, it was unable to pay its bills. The judge found that public employee pensions are not entitled to heightened protection in a municipal bankruptcy, a first of its kind ruling, allowing Detroit to negotiate with its employees and retirees on lowering their pension benefits through the bankruptcy action; representatives of Detroit public employees have vowed to appeal this ruling. It is unknown whether pension benefits of current or retired employees will actually be impacted by the Detroit bankruptcy as the parties continue to negotiate.

It is unlikely that SDCERS members and retirees will be faced with a threat to their pension benefits as a result of the Detroit bankruptcy filing. City of San Diego officials have publicly commented that the City  is not insolvent and not facing bankruptcy. In fact, the City Attorney has referred to bankruptcy in San Diego as “nonsense.” Members are encouraged to read the City Attorney’s November 2010 opinion on this issue by following the link provided below.

The ruling by the Detroit bankruptcy judge created new law that is likely to be appealed, with no final decision for some time. Regardless of the Detroit ruling’s immediate impact, SDCERS has sufficient funds to pay its current and future retirees for decades to come, even if no additional plan sponsor contributions were received. SDCERS will continue to fulfill its fiduciary duty to take all action necessary to ensure the payment of vested benefits to its members.

City Attorney opinion on bankruptcy:

Document Under Categories: Litigation, Retirement Resources