Focus on ... the Detroit bankruptcy and its implications for public employee retirement plans

On Jul 18, 2013, the City of Detroit filed for protection under Chapter 9 of the US Bankruptcy Code. The city owes its approximately 100,000 creditors between $18 billion and $20 billion. On Dec 3, 2013, US Bankruptcy Judge Steven Rhodes ruled that the city is entitled to seek bankruptcy protection....

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Bibliographic Details
Published in:Journal of pension benefits 2014-01, Vol.21 (2), p.3
Main Author: Pratt, David A
Format: Article
Language:English
Subjects:
Automobile industry
Bankruptcy
Bankruptcy law
Bankruptcy laws
Cities
Effects
ERISA
Government employees
Orr, Kevyn
Pension funds
Public employees
Retirement benefits
Retirement plans
State court decisions
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Summary:On Jul 18, 2013, the City of Detroit filed for protection under Chapter 9 of the US Bankruptcy Code. The city owes its approximately 100,000 creditors between $18 billion and $20 billion. On Dec 3, 2013, US Bankruptcy Judge Steven Rhodes ruled that the city is entitled to seek bankruptcy protection. Although the case is still in its very early stages, several important areas of controversy have already emerged: potential conflicts between federal bankruptcy law and the state constitutional protection of public employee pensions; how to value pension obligations in the bankruptcy; and the rights of employees and retirees on the one hand and other general creditors (e.g., bondholders) on the other. The bankruptcy may revive the debate as to whether governmental plans (or church plans, for that matter) should be exempt, thus exposing plan participants to risks against which their private sector counterparts are protected by ERISA.
ISSN:1069-4064