Q&A: Pensions for City of Chicago retirees

What happened to our pensions?

Pushed by Mayor Rahm Emanuel and approved by the Illinois General Assembly, drastic cuts to the pension benefits earned by active and retired city of Chicago employees were signed into law by Governor Pat Quinn on June 9, 2014.

The We Are One-Chicago union coalition that includes AFSCME, the Chicago Teachers Union, the Fire Fighters Association, the Fraternal Order of Police, the Illinois Nurses Association and the Police Benevolent & Protective Association immediately announced plans to sue to have the law struck down on the grounds that it violates the state constitution’s requirement that pension benefits cannot be “diminished or impaired.” Click here to read a copy of the complaint: http://www.scribd.com/doc/250301530/Lawsuit-Chicago-pension-cuts-are-unconstitutional

On July 24, 2015 the Cook County Circuit Court ruled in our favor (the case now being called Jones v. MEABF). The court found that steep cuts to the pension benefits of active and retired participants in the city of Chicago Municipal Employees Annuity and Benefit Fund (MEABF) violate the state Constitution, which prohibits any measure that would diminish pension benefits already promised to active and retired public employees.

 The Illinois Supreme Court heard the City of Chicago pension case on November 17, 2015.

At the high court hearing, a city lawyer claimed that pension cuts are necessary to keep the funds from running out of money. He also argued that because the legislation also requires increased employer contributions, it provides workers and retirees with a "net benefit."

But union attorney John Shapiro “poked giant holes in the city’s argument:"

“Setting aside money to pay what is already a constitutional guarantee is not a benefit, new or net. Funding provisions cannot justify pension benefit reductions in Illinois,” Shapiro told the Court. “The funding mechanism for employer contributions simply has not matched known fund obligations. Now that the result of that disconnect is intolerable, they just don’t want to pay for the benefits. But, that’s precisely what the pension protection clause precludes.”

On March 24 the Illinois Supreme Court struck down the City of Chicago pension law once and for all. While this attempt to attack pensions has been thwarted, Retirees should stay vigilent for furhter attacks in the future.

How did this affect me?

The law would have significantly reduced the annual cost-of-living adjustment (COLA) that helps your pension keep pace with inflation. This law would replace the current 3% compounded annual COLA with a “simple” COLA that would be the lesser of 3% or the rate of inflation.

Additionally, you would be subjected to three years of COLA freezes, in 2017, 2019, and 2025 where you would receive no COLA at all.

Will my pension be reduced?

The amount of your current pension benefit will not be reduced. In fact, even if the new law goes into effect, your benefit amount will increase on the date upon which a cost-of-living adjustment (COLA) would normally be implemented.

HOWEVER, in most cases the amount of the COLA that is added to your pension will be LESS than it would have been had this law not been passed.

What that means is, over time, you will be making much less than you should because of this law. The cuts to your COLA will reduce pensions by an average of 30% over 20 years for many retirees. The average annuitant in the Municipal fund will lose approximate $250,000 over that time period, with those living longer seeing even worse reductions.

Making matters worse, by 2017, the City will completely stop paying for retiree health insurance, which makes these pension cuts all the more dire. Since most City of Chicago retirees do not receive Medicare, premiums for a married couple will be more than $1,000 a month, which now must be paid with a devalued pension plan.

How will this have affected me if I have not yet retired?

If you have not yet retired you will face the same COLA cuts that current retirees face. But, in addition to the COLA freezes in 2017, 2019, and 2025, you will face an additional COLA freeze during your first year of retirement.

In addition to all of that, the City of Chicago pension bill hikes current employee pension contributions by 2.5% – for a total contribution of 11% of salary.





Sign Up for Email Updates

Get Text Message Updates

Msg & data rates may apply. Text STOP to 228466 to stop receiving messages. Text HELP to 228466 for more information.
Terms & Conditions

Affiliated Links