Detroit, MI, United States (4E) – Detroit’s retirees asked the city’s Bankruptcy Court Tuesday to stop a plan to cut their health care benefits by 83 percent arguing that it violates the Michigan constitution.
The Official Committee of Retirees of the City of Detroit filed the lawsuit against the city government before Judge Steven Rhodes, who is overseeing the city’s $18 billion bankruptcy. The chapter of the American Federation of State, County and Municipal Employees union was also among the plaintiffs.
Aside from allegedly violating constitutional protection of contractual obligations, the suit argues that many of the estimated 24,000 retired Detroit employees are too old to go back to work and live near the poverty line.
Detroit emergency manager Kevyn Orr ordered funding for retiree health-care benefits reduced to about $30 million a year from about $180 million, the complaint said. The plan Orr announced last week replaces health care benefits for retirees younger than 65 with a stipend of $125 a month to buy coverage while older retirees will be shifted to Medicare. The number of younger retirees in the city is about 8,000.
Orr said the plan, which will take effect on Jan. 1, cuts pensioners’ benefits because nearly $6 billion of the city’s obligation to retirees is unfunded. The plan could reduce Detroit’s annual health care costs for retirees from $170 million to $50 million or less.
Meanwhile, the trial of the city bankruptcy case resumes Wednesday with Michigan Governor Rick Snyder expected to testify.