Posted by Kimberly McNamara.
The idea of pensions have been around for nearly 100 years. Detroit, a city that recently filed for bankruptcy, is now facing more monetary concerns, and many are looking for someone to blame. According to The New York Times, the city of “Detroit has been a client of Gabriel Roeder since 1938, when the city first started offering pensions. Now the city is bankrupt, the pension fund is short, benefits are being cut . . . .” Gabriel Roeder Smith & Company is a widely known, consultant and actuary firm dealing mostly with pension plans. This company was hired by the city of Detroit to calculate the amount of money coming in versus the amount of money needed for current and future pension pay-outs.
Many Detroit pension holders are now filing lawsuits against Gabriel Roeder. There are three current cases against Gabriel Roeder: one by members of Detroit’s police and firefighting force, another by Wayne County, and Ms. Estes, a citizen and pension holder in Detroit.
Now Ms. Estes has lost not only part of her pension but much of the savings tied up in her house, while she and her neighbors overpay for paltry city services. She says she might have been spared some of the misery had Gabriel Roeder warned the trustees years ago that the pension system was unsustainable and recommended changes.
Ms. Estes is just one of many who have been put in this situation created by poor business decisions. She was also told that, “she would have to forfeit $25,000 when she reaches retirement age . . . .” There are a multitude of people who had depended on their pension for retirement and simply will never see it.
Unfortunately, Gabriel Roeder would not exceptaccept the advice of other firms including government agencies like the Governmental Accounting Standards Board (G.A.S.B.). If they had, maybe Detroit’s bankruptcy situation would be different and quite possibly there would be no lawsuits being brought againstto Gabriel Roeder Smith & Company. The firm said they “would vigorously defend itself against the lawsuits,” but lets wait and see how well that holds up in court.
Kimberly is a business major at Montclair State University, Class of 2016.