POLICEMEN S ANNUITY & BENEFIT FUND OF CHICAGO July 2016, No. 58. Far and away the best prize that life has to offer is the chance to

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1 PENSION ADVISOR POLICEMEN S ANNUITY & BENEFIT FUND OF CHICAGO July 2016, No. 58 Far and away the best prize that life has to offer is the chance to work hard at work worth doing. Theodore Roosevelt EXECUTIVE DIRECTOR S REPORT By Regina Tuczak I am pleased to announce that the Fund has hired a new Chief Investment Officer, Ms. Aoifinn Devitt, effective April 5, Ms. Devitt has worked with institutional clients for her entire investment career, which has spanned the US, Europe and Asia. Her prior experience includes work as a specialist consultant at Cambridge Associates Limited (London and Boston), establishment of Clontarf Capital, a research and consulting firm with focus on assisting public pension funds, work in the investment banking division of Goldman Sachs in London, and experience as a corporate attorney at Debevoise & Plimpton (New York and Hong Kong). Aoifinn graduated from Trinity College Dublin with a first class degree in law and received a BCL (Oxon) and an MBA (INSEAD, Dean s list). Please join me in welcoming Aoifinn to the Fund. Prior to Aoifinn joining the Fund, Trustee and Lieutenant James Maloney served as the Fund s Acting Chief Investment Officer, for approximately sixteen months. I have enjoyed working with Trustee Maloney during this transition period and sincerely thank him for his dedication and commitment to the Fund in this important role. Trustee Maloney will continue his role as Investment Committee Chair and Recording Secretary to the Retirement Board. We look forward to Trustee Maloney s continued efforts to service the Fund and its members. The Fund sent a mandatory signature verification form to all annuitants in early March. All responses received have been recorded into the Fund s system and signature verification continues. For those who have not yet responded, a second and final verification form was recently sent. Please respond ASAP to avoid any disruption in payment. As staff reviewed the many signature verification forms received, many changes were noted, including address modifications, new phone numbers and power of attorney requests. Please make sure that you keep the Fund s staff updated on these important changes, so that all communication sent to each annuitant is received. Note that the Fund is completing its financial statement audit and actuarial valuation for the year ended December 31, These important documents should be posted on the Fund s website in early July. In conclusion, I hope that all members are able to enjoy these precious summer months ahead. In the words of William Shakespeare, Summer s lease hath all too short a date. Pension Advisor 1

2 TRUSTEES CORNER INVESTMENT & RETIREMENT UPDATES First of all I want to congratulate all our retirees for Thank you for your years of service to the Citizens of Chicago. I also want to thank our hardworking staff at the Pension Fund for their service and devotion. I want to welcome our new Chief Investment Officer (CIO), Aoifinn Devitt. She joined our Fund in April of She is an extremely competent and knowledgeable investment professional. I look forward to working with her. All the investment managers who have met with her tell me we have a great person with her and she is very smart. Some numbers, as of April 30, 2016, we had 12,017 sworn personnel paying into the Pension Fund. That number has probably changed some since then. As of May 15, 2016, we have had 291 retirees for That compares to 399 for all of 2015 and 350 for all of The Fund has hired a manager for a Private Debt strategy with a European focus. Many managers I had met with believe there is a great opportunity in this space, especially in Europe with the bank lending ratio changes over the past few years. We may be looking to add to this space. We are also hiring Opportunistic Credit strategy managers. These are income generating strategies which will help our Fund with liquidity issues. We are also in the middle of an RFP for an Investment Consultant. We are mandated by the State of Illinois to perform an RFP for Consultant at least once every five years. I was proud to serve as the Acting CIO since November, It was an interesting experience. I worked in partnership with our Pension Consultant and our Executive Director. We continued along a short and long term roadmap and strategy for our Pension Fund. Thank you, Lt. James Maloney Recording Secretary, Chairman of the Investment Committee THE MAYOR DOES IT AGAIN! As I am sure many of you are aware, the Mayor was able to successively kick the can down the road again when he maneuvered to have Governor Rauner s veto overridden. Governor Rauner vetoed Senate Bill 777 and was then overridden by votes in the State Senate and House. Senate Bill 777 saved the City the increased payments from 2016 through 2020 that are the Actuarially Required Contribution ( ARC ) payments. The ARC payments do not kick in until 2021 through the legislation. Also, the old law required the Fund be 90% funded by SB777 extends that until When Governor Rauner vetoed the bill, he cited the increased cost to the City, and taxpayers, over time, even though there was short term savings. If you are a regular reader of our newsletter maybe you remember when I made the exact same observation in December of 2013: In terms of total City contributions from 2013 to 2065, the current funding policy is expected to cost about $28 billion while the alternate funding policy is expected to cost about $47 billion. After plan year 2015, employer contributions are projected to increase to 45.9 percent of pay or a City multiple of approximately 4.8 times employee contributions. Our actuary concluded that: The alternate policy does not finance plan costs in a reasonable pattern and in our opinion is not consistent with generally accepted actuarial principles. The study showed that under the proposed alternate funding policy the City would save approximately $3.7 billion in the short term (total payments made from 2013 to 2040), but it would cost them $18.6 billion in the long term (total payments made from ). Moreover, the funding ratio would still be at only 35.12% at 2040 instead of 90% under the current policy target. December 2013 Pension Advisor Great minds must think alike!! The Mayor likes to cry poor to justify the passing of legislation like SB777. The City has the money when it comes to pet projects the Mayor wants or TIF Funds for projects that are in economically disadvantaged areas. The Mayor refuses to open the books entirely when he complains that the City does not have the money. Just once, I wish someone would Pension Advisor 2

3 call his bluff and audit all of the City s books to see where the money is and where it is really going. Now the good news: in 2015, the City made a payment of approximately 200 million and we contributed approximately 100 million. Even with the passing of SB777, the City has to contribute $420 million by the end of 2016, and we will contribute another 100 million. While our contributions will tend to stay flat or increase nominally, the City will have to increase their payments every year and then pay the ARC in That is how the law stands..for now. Sgt. Brian Wright #1575 Sergeant Pension Board Vice-President NOT ON OUR DIME! Hello to All, My colleagues here at the fund have written current information of the state of our pension, so I will not re-hash what you may have just read. I ll bring you up to speed with what seems to have taken on a life of its own; pension fraud. As some of you may know and figured out, the Pension Board of Trustees have been taking a hard look at any and all disability cases. By state statue, the Fund is mandated to bring each person who is receiving a disability benefit in throughout the year for an updated medical evaluation. During my four years as your elected trustee, the Board of Trustees has terminated the disability benefits of 46 individuals after medical testimony was presented through the officer s lawyer(s). Some have chosen to retire, some have returned to work, and a few have quit all together and took a refund of their contributions. This can be translated into millions of dollars that you the hard working officer who contributes 9% of your weekly income would have been paying for these individuals as business as usual. A few of these cases were out and out fraud. Before I go any farther, I want you the reader to keep this in mind. This article is not meant for officers who may truly need the disability benefit. For those of you who may know me, I ll roll out the red carpet as best I can to make the transition from leaving the medical roll to the disability roll as smooth as possible. The fiduciary responsibility that I have been entrusted with on your behalf leaves me having to make some very difficult decisions. However, some cases are a snap as one officer with a very bad back claim is observed pushing a wheel barrow full of concrete as he lays the foundation for his summer home. So now you may be asking, what has the Board of Trustees done with the cases where fraud was suspected? Simple, the Board of Trustees through the Funds attorney have turned these few cases over to the Cook County State s Attorney s Office for review and/or criminal indictment. It s called pension fraud which is a class 4 felony. If a conviction results, the individual officer will be stripped of receiving a pension. On the same topic, I have received several responses to an article that I mention in a recent quarterly Pension Advisor Newsletter concerning officers who were denied a disability claim. One in particular was an officer who tripped in a hallway claiming permanently disabled from a sore knee. (You would not think so if you saw this person on Facebook, as pictures of the officer posted by the officer demonstrated quite the opposite of the claim.) Anyway, this person filed for an Administrative Circuit Court review and lost. The court affirmed the Police Pension Board s decision to deny a duty disability claim. Now this same officer in the quest to collect a disability benefit has filed with the Appellate Court to re-hear the facts of the case. NOTE: Officers or a citizen who files in this court can expect to pay between $8,000 and $10,000 bucks when all is said and done. Beware officers; I have seen other officers raising money on the internet site: go-fund-me for their appeal for the same thing. As every working copper knows, there s a sucker born every day. Don t you be a sucker and don t put your money where your mouth is to help facilitate this means of fraud! Come and see for yourself. The monthly meetings are open to you and the public. Be informed. Lastly, all our administrative clerical staff has been working their butts off wrapping up the officers retro calculations and moving into the widow s calculations. All these calculations are hand drafted. They don t push a button on a computer continued on next page Pension Advisor 3

4 and in an instant it s done with 100% accuracy. On top of this process we have the day-to-day business of officers retiring, quitting etc. So please if you should happen to call the pension office, mind your phone manners and temper. The staff here is your friend. Treat and talk to them as your family. Stay Safe and God Bless America. Officer Mike Lappe, Pension Board Trustee DATA UPDATES AND MORE I hope we are going to have as nice a summer as the winter. The total number of active police officers making monthly annuity contributions to the Pension Fund is 12,007 as of May 31, This breaks down to 2719 females and 9288 males. The total number of police officers hired during 2015 was 441 of which 94 were female and 347 were male. The total number of police officers who left the Police Department during 2015 was 456. Of the 456 police officers, 1 officer died while on the job, 7 officers were discharged, 3 probationary officers were discharged, 38 police officers chose to resign without a pension, and 406 officers completed their career and retired with a pension. The rank breakdown of the 406 officers is 323 under the rank of Sergeant, 56 Sergeants, 19 Lieutenants, 2 Captains and 6 Exempt rank. The total number of officers on disability is 285 which breaks down to 202 on duty disability, 38 on ordinary disability, 30 on occupational heart disability and 15 on total and permanent disability. The breakdown of active officers (12,007) will not be exact because I am not listing every position. Totals of each rank/position are approximate: 9288 Patrolman, 887 Detectives, 1111 Sergeants, 213 Lieutenants, 32 Captains, 35 Commanders, 4 Chiefs, 16 Deputy Chiefs, 24 Canine Handlers, 85 Evidence Technicians, 40 Explosives Technicians, 26 Marine officers, 20 Mounted officers, 117 Field Training officers and 20 Traffic Specialists. A total of 12,647 annuitants are receiving approximately $58 million in benefits monthly from the Pension Fund as of May 31, are retired police officers and 3143 are widows/widowers. For the month of May 2016, the average retiree was 56 years of age with 27 years and 5 months of service. The total amount of assistance provided to Chicago Police Officers Families since the Memorial Foundation began in August 2007 is $7.5 million. This assistance is made possible by the generosity of donors and by the payroll and pension contributions of active/retired Chicago Police personnel and their friends. To date, the Chicago Police Memorial Foundation has provided $2,290, for the purchase and distribution of 6,113 replacement bulletproof vests to Chicago police officers through the Get Behind the Vest initiative. They also have provided $72, in $2500 memorial grants to 29 children and paid tuition ( school year) in the amount of $171, for children of officers who were catastrophically injured or killed in the line of duty. The City of Chicago has been sending letters to all annuitants since This is when Mayor Rahm Emanuel decided to terminate healthcare benefits for all annuitants (effective January 1, 2017) who retired on or after August 23, Litigation challenging the City s decision to no longer provide healthcare benefits to annuitants has been filed and is currently pending in the Circuit Court of Cook County. The case of Underwood, et al. vs City of Chicago, et al CH The next court date is Wednesday, July 6, 2016 at 1:30PM in Judge Neal Cohen Courtroom #2308. This should be the final hearing of the arguments for the case to be heard and the Judge hopefully will issue a final ruling sending this case to the Illinois Supreme Court. If Judge Cohen decides to send the case to the Illinois Supreme Court, this most likely will extend into 2017 before a decision is rendered by the Illinois Supreme Court, assuming the Illinois Supreme Court decides to accept the case. If they don t accept the case, it is all over. Therefore, as of December 31, 2016, (excluding annuitants who retired prior to August 24, 1989 and retirees that are covered by a union contract) all annuitants will cease to have healthcare provided by the City of Chicago. Pension Advisor 4

5 At the present time, FOP Lodge 7 has been negotiating with insurance carriers to provide healthcare benefits to all effected annuitants. They will be informing all annuitants of their progress in the FOP newsletter and on their website. Regardless of what may occur with pending court cases, the annuitant healthcare benefits provided by the City of Chicago will terminate on December 31, The only way this will not occur is that the Illinois Supreme Court ruled against the City of Chicago or puts an injunction against the City preventing the termination. Again, please be advised that effective January 1, 2017, you will no longer receive health care benefits from the City of Chicago. Concerns regarding this should be addressed to Mayor Rahm Emanuel s office and your alderman. Pension Advisor 5 Ken Hauser, Retired Police Officer Pension Board President

6 Pension Advisor is a publication of the Policemen s Annuity and Benefit Fund. You will be receiving a copy to update you on the matters that affect your pension and the concerns of active police officers, retirees and widows that make up our membership. If you have a question about your pension or the Fund, or, if there is a particular issue you would like to see addressed, please feel free to send a note to: POLICEMEN S ANNUITY AND BENEFIT FUND PENSION ADVISOR 221 North LaSalle Street Suite 1626 Chicago, IL POLICEMEN S ANNUITY & BENEFIT FUND CITY OF CHICAGO 221 NORTH LASALLE STREET SUITE 1626 CHICAGO, ILLINOIS POLICEMEN S ANNUITY AND BENEFIT FUND OF CHICAGO 221 N. LaSalle St., Suite 1626 Chicago, IL Telephone: (outside 312) Toll Free: RETIREMENT BOARD Kenneth A. Hauser, President, Elected Member Kurt A. Summers, Jr., Trustee, City Treasurer, Appointed Member James P. Maloney, Recording Secretary, Elected Member Regina M. Tuczak Executive Director James A. Dollard Comptroller Visit our website at: chipabf.org OFFICE HOURS: 8:30 A.M. 4:30 P.M. MONDAY FRIDAY Juan C. Avila, Trustee, Appointed Member Carol Hamburger,Trustee, Deputy Managing Comptroller, Appointed Member Michael K. Lappe, Trustee, Elected Member Aoifinn Devitt Chief Investment Officer Sonny Panaligan Assistant Comptroller Carole L. Brown, Trustee, City Chief Financial Officer, Appointed Trustee Brian E. Wright, Vice President, Elected Member