Thousands of Chicago police officers were caught off guard this week when they received a letter from their pension fund indicating a costly error due to a payroll mishap. Approximately 3,000 officers are now required to rectify a payment shortfall in their pension contributions, including interest, as a result of a contract-induced oversight.
The Fraternal Order of Police, Lodge 7, which represents the majority of rank-and-file officers, expressed its intent to challenge the mistake legally. The union plans to file a grievance, insisting that the city, not the officers, should be responsible for the interest incurred. “This is a cost that the pension fund is looking to hammer our officers with,” stated FOP President John Catanzara in a recent statement, reflecting deep frustration with the situation.
“The city did not withhold the correct 9% of members’ salary and duty availability pay for the required payment,” according to a post on the fund’s website.
The issue primarily affects Tier 2 members of the Policemen’s Annuity and Benefit Fund of Chicago (PABF), those who commenced their duties with the Chicago Police Department (CPD) post-January 1, 2011. This group constitutes about half of the fund’s more than 12,000 active members. Typically, sworn officers contribute 9% of their salary directly to their pension, an amount automatically deducted from their paychecks.
The root of the problem lies in a “fiscal year discrepancy” with the City of Chicago, as explained in a letter from PABF’s Executive Director Kevin Reichart. The retroactive salary contract payment received at the start of 2022 was erroneously counted toward the 2022 annual salary cap by the city, leading to incorrect withholding of the required 9% from members’ salary and duty availability pay.
Amidst no comments from Reichart or the city’s Finance Department on the oversight, the union’s discontent grows. Officers are now urged to acknowledge the mistake formally by signing a letter and settling the difference by August 31. Failure to do so would result in the owed amount, plus interest, being deducted from their future annuity payments upon retirement.
The repercussions vary, with some officers owing as little as about $80, and others up to $1,300. Catanzara blamed the CPD’s Finance Department for the blunder and criticized the pension fund for not addressing the issue sooner with its members. Additionally, he argued that since these earnings were already taxed at state and federal levels, the city should also refund the taxes charged on that income.
The controversy highlights ongoing challenges within one of the city’s least funded pension systems, the PABF, which reported having sufficient assets to cover just 21.76% of its obligations as of the end of 2022. As tensions mount between the department and its administration, the resolution of this financial debacle remains uncertain.