Members of Puerto Rico’s public sector pension plans are facing a benefits freeze and the transformation of their defined benefits plans to defined contribution plans.

The decision to cut changed the plans was made as a result of an ongoing financial crisis in the most populous U.S. territory. After it defaulted on bonds in 2014, politicians seeking to reduce Puerto Rico’s expenditures began pushing to reform its pension system.

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The move also comes as a lawsuit between the body that oversees Puerto Rico’s pensions and its governor, Pedro Pierluisi, is put to rest. The conflict between the territorial government and the oversight body came to a head after legislators passed three resolutions intended to improve the benefits of public sector plan members. In August, it enacted three resolutions that would provide the territory’s state employees with benefits.

According to Puerto Rico’s Financial Oversight and Management Board, which oversees the public sector DB plans, Pierluisi had agreed not to enact the resolutions until a workable plan was reached for making the new obligations possible. In December, the rules came into effect and the FOMB filed a lawsuit against the governor.

In a statement, the FOMB announced it had reached an agreement to protect the territory’s public sector pension plans after their transformation into DC plans.

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“The agreement reached today will avoid costly and time-consuming litigation and a potential delay in confirmation of the plan of adjustment to reduce Puerto Rico’s debt and end bankruptcy. The oversight board remains committed to continue to work together to find affordable solutions that will move Puerto Rico forward without the risk of falling back into old practices of overspending.”

The statement noted both the FOMB and the government would work to reach an agreement to improve the benefits offered to police officers and teachers, whose existing DB pension benefits were frozen. The agreement brings a protracted period of negotiation between the government and the FOMB to a close.

“The oversight board is pleased to have reached an agreement with the administration of Governor Pedro Pierluisi that creates an opportunity to provide additional retirement benefits for certain government employees in a fiscally responsible way.”

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