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Mediators in the Detroit bankruptcy case say the city and its retirees have reached an agreement on health insurance benefits—a key hurdle in the process.

The retirees had filed suit to block a plan by Emergency Manager Kevyn Orr that would have shifted retirees over 65 to Medicare, and given those under 65 stipends to buy coverage on Affordable Care Act exchanges.

"Following completion and signing of a mediation agreement, the parties will submit a stipulation to the bankruptcy court dismissing the lawsuit," a statement from the mediators said.

Details of the settlement have not been released, but a hearing on the lawsuit scheduled for Monday has been adjourned, the mediators say.