April 16 (Bloomberg) — Detroit's two pension systems said they reached a tentative deal reducing cuts the bankrupt city's emergency manager threatened to impose on retirees as part of its plan to shrink $18 billion in debt.

General employees' pensions would shrink by 4.5 percent, instead of the 26 percent initially proposed by emergency manager Kevyn Orr, according to a person familiar with the settlement. They would lose an annual cost of living adjustment and anyone who may have been overpaid under retirement-related saving plans would be subject to a maximum 20 percent clawback, said the person, who asked for anonymity because the negotiations are confidential.

Police and fire employees would see no reduction in their monthly pensions and have their cost-of-living adjustments capped at 1 percent. The agreements may make it easier for the city to win enough votes to lock in an $816 million contribution from Michigan lawmakers and private foundations, helping to clear the way for the city to end the biggest municipal bankruptcy in U.S. history later this year.

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