Pensions are safe for retired Detroit police and firefighters in Detroit, and they may still get a one-percent cost-of-living adjustment on an annual basis instead of a 2.25-percent adjustment they got previously.

A new deal has been reached between the board of directors of the Retired Detroit Police and Fire Fighters Association and the chief mediator, Judge Gerald Rosen on Tuesday. Under the new deal, police and firefighters will receive the cost-of-living adjustment dependent on the rate of return of the pension fund.

This is the third deal reached recently as City of Detroit and creditors negotiate for a speedy resolution to the biggest municipal bankruptcy in US history.

Detroit's Emergency Manager Kevyn Orr called the deal a "huge step forward" and thanked the retirees association for its willingness to compromise.

The deal still needs to be approved by the retirees.

Under the deal, the city has agreed to create two separate Voluntary Employee Beneficiary Associations for police and firefighters and members of Detroit's General Retirement System.

The Detroit News reported that retirees are expected to approve the 816 million dollars pledged toward their pensions by 12 private foundations, the state of Michigan and donors of the Detroit Institute of Arts, and in exchange for the money, the Detroit Institute of Art's assets would be protected from a fire sale.