PENSION ADVISOR EXECUTIVE DIRECTOR S REPORT

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1 PENSION ADVISOR POLICEMENS ANNUITY & BENEFIT FUND OF CHICAGO ELECTION NEWS Per Illinois Statutes, there are two elected Trustee positions for this Pension Fund that expire on November 30, These Trustee positions are as follows: (1) member who represents the Annuitants and (1) member who represents the active members of the Police Department of the rank of Patrolman, Investigator, or equivalent rank. Any annuitant or member seeking election, must pick-up petitions at the office of the Fund and obtain the appropriate number of signatures. Petitions are available at the Fund s office, Monday Friday, 9am to 4pm. Completed petitions must be dropped-off at the Fund s office beginning September 26th, until October 2nd. Ballots for election of these two Trustee positions will be mailed beginning October 10th to the address on record of applicable members; all balloting will be conducted via standard U.S. mail. Such ballots MUST be received by the post office by 9am on Thursday, October 25, 2018, at which time, all ballots received by the post office will be counted. The term of these two Trustee positions will expire November 30, The election will be conducted in accordance with the rules adopted by the Retirement Board. An independent accounting firm will oversee all election procedures, including the ballot counting. For other information regarding September 2018, No. 62 the election, please visit the Fund's website at or call the Fund office. EXECUTIVE DIRECTOR S REPORT By: Regina Tuczak BOARD PRESIDENT RETIRING President Kenneth A. Hauser has announced that he will be resigning from the Retirement Board at the conclusion of his current term, November 30, President Hauser has served as a member of the Retirement Board for 25 years, with the last 8 of those years as President of the Retirement Board. When President Hauser retired from the Chicago Police Department, he had 37 continued on next page Pension Advisor 1

2 years of service to the City, with a start date of September 30, While President Hauser has undoubtedly seen many, many changes within the Police Department and the Retirement Board during his long tenure, his dedication to the membership and the Fund has not wavered. President Hauser has been a wealth of knowledge of Fund and Department history, an advocate for police officers and their families, especially the minimum annuitant widows of the Fund, and has always been forthright in his concern for the wellbeing of the Fund. I would like to extend my heartfelt wishes to President Hauser in his continued retirement, that he may enjoy good health and good times with family and friends. His leadership and dedication will truly be missed. NEW FUND COMPTROLLER I am very pleased to report that the Fund hired a new Comptroller, Caroline Vullmahn, effective June 18, Caroline brings many years of diverse experience to the Fund, including various positions as a Chief Financial Officer and/or Finance Director in a multitude of industries. Caroline has a Bachelor of Science degree in Accounting from the University of Illinois-Chicago and holds an active CPA License. Caroline replaces James Dollard, who resigned in Please join me in welcoming Caroline to the Fund s staff FINANCIAL REPORTING The Fund s management is pleased to report that the audit of the Fund s financial statements as of and for the year ended December 31, 2017, has been completed. Consistent with prior years, the Fund received an unqualified opinion (also referred to as a clean opinion) from the Fund s independent auditors on the 2017 financial statements. These audited financial statements provide the statements of net position restricted for pension benefits and the net increase in net position restricted for pension benefits. These 2017 financial statements are posted on the Fund s website at The Fund s actuarial valuation reports as of December 31, 2017, are also available and are posted on the Fund s website. To view any of these reports, please click on the Financial Reports link on the website, and the most current financial and actuarial valuation reports, along with historical reports dating back to 2007, are posted. Should you desire a hard copy of any of these financial reports, please contact the Fund s office and such reports will be printed and mailed to you. FRAUD There are many different forms of fraud that impact this Fund. A few examples that occur and are encountered by the Fund s staff and Trustees on a frequent basis relate to the untimely reporting of the death of an annuitant, misrepresentation of a health condition relating to disability, and inaccurate reporting of family situations (marriages, divorces, children, siblings, etc.). Should you suspect potential fraud impacting this Fund, please note that you may report this matter in many ways. You may contact your Trustee representative, the Executive Director, the Fund s attorneys, or other staff members of the Fund. It is always helpful if the person disclosing the suspected fraud provides his/her information to assist with the investigation of the incident, however, anonymous fraud reports are also investigated to the extent possible. Please note that the Fund s staff and Trustees work very diligently to protect Fund assets and consider fraud a very serious matter. The Fund will and has worked in cooperation with the Chicago Police Department, the State s Attorney, and other government agencies, to the fullest extent provided under the law to prosecute any person who has been suspected of committing fraud impacting the Fund. Pension Advisor 2

3 TRUSTEE S CORNER by Sgt. Brian E. Wright #1575, Trustee, Recording Secretary City because the funded ratio would be higher and the amount needed to obtain 90% funded by 2055 would be lower annually. This saves the City money on an annual basis in addition to the interest differential savings mentioned above. Needless to say, I support the POBs and their immediate benefit to the fund, as long as the City does not change the statute and keeps making their payments as required. The POBs show willingness by the City to address the funded ratio issues of the pension funds and hopefully resolve the problem going forward. PENSION OBLIGATION BONDS Recently the City of Chicago has introduced a plan to borrow pension obligation bonds (POBs) of $10 billion dollars. This is good news for the pension funds. While we do not know exactly how the money would be distributed, we would like for the City to distribute the money to the funds immediately. If the City can issue POBs at a lower interest cost than what s required for pension debt, and uses all the proceeds from those POBs to pay down pension debt, the funded ratio of its pension systems would immediately increase, and the interest rate differential would save taxpayers money. The more money the funds have to invest, the more money can be made and correspondingly, the higher the funded ratio gets. The one caveat I would have though, is that the current legislation remains and is not changed by the City in the future. This means the POBs would not relieve the City of their annual pension payments as outlined in the statute. If we can receive an influx of money from the POBs, and still receive the scheduled payments from the City as detailed in the statute, the funded ratio would increase steadily. This would, in turn, actually lower the actuarial required contribution, or ARC, payment by the FUND PRESIDENT KEN HAUSER I was just informed that Pension Fund President Ken Hauser will not be seeking reelection to the Fund. I wish Ken all the best, but he will be sorely missed at the Fund. Ken has been a Trustee for 25 years at the Fund and has a wealth of knowledge and experience that cannot be replaced. I have been on the Board for 7 years and Ken has taught me a tremendous amount. He has introduced to me to colleagues and professionals in the industry that are beneficial to the Fund. He has explained to me how the Fund has operated over his 25 years, what has worked and what can be improved. He is honest, speaks his mind and always supports the members, annuitants and widows of the Fund. Ken has been a great asset for this Fund and will always be remembered here. Hopefully, the next Trustee can follow in his footsteps and take up the torch for the Fund just as Ken did. Thank you for your lifelong dedication and service to the Chicago Police Department and the Chicago Police Pension Fund. We appreciate everything you have done here. We will miss you Ken but wish you good health, happiness and success for the next chapter of your life. continued on next page Pension Advisor 3

4 by P.O. Tom Beyna, Trustee DISABILITY BENEFIT APPLICATION There are often questions when an officer needs to make an application for disability so I would like to take this opportunity to explain the process. Hopefully you will never need to apply for a disability benefit but unfortunately in our line of work injuries occur and as we get older we are more susceptible to illness. In the event of an injury or illness, every officer is entitled to 365 days of medical time for each injury on duty and 365 medical days for a nonduty illness or injury within a two-year period. It is important to keep track of your medical time used and start the application process when you have approximately two months of medical time remaining. Understand that there will be a period of time when you are without income as you transition from the active payroll to disability benefits. This period can last from 6 weeks to several months depending on the length of time it takes to complete the application process, physician appointments, and number of cases waiting to be heard before the Board. The first step in the application process is to contact the Medical Services Section and notify them of your intention to apply for disability benefits. You will be required to sign a PAR form to take a leave of absence in order to apply for a disability benefit. You will also need to sign a medical records release form to allow the Medical Section to copy and send your medical record to the Pension Fund. When the appropriate forms have been signed with the Medical Section, you should contact the Pension Fund and speak to a disability advisor about the process. When the Pension Fund receives your medical file, you will be contacted to schedule an appointment to complete your application for disability. When all applications and appointments are complete, you will be scheduled for a hearing before the Board, who will ultimately determine whether a disability will be granted. The medical and disability benefits available are valuable benefits that allow officers the opportunity to rehabilitate themselves and potentially return to work. Unfortunately, there are some officers that abuse these benefits and defraud the Pension Fund. I strongly encourage contacting the Pension Fund with any information of anyone fraudulently receiving disability benefits. Remember, it is your hard earned money out of the Pension Fund paying for these disability benefits. FUNDED STATUS The most challenging issue the Fund currently faces is our funded status. At this time, the Fund is severely underfunded with a funding ratio of 23%. The most important factor to increase our funded status is receiving the required contributions from the City. This year the City is required to contribute $500 million of which the fund has received $460 million to date. Recently in the news there has been talk from the City on a plan to issue pension obligation bonds to address the unfunded liabilities of the pension funds. If this plan is properly constructed it could immediately and significantly increase the assets of the fund. According to the current legislation and projected actuarial required contributions, the Fund will not reach 50% funded until 2043, another 25 years. If pension obligation bonds are issued it should allow the Funds to receive money from the bondholders in order to reduce the unfunded liabilities, while the City being the bond issuer Pension Advisor 4

5 pays the debt owed to the bondholders. The objective is for the pension funds to invest the money and earn a rate of return greater than the interest rate paid on the bonds, which if successful could result in a cost savings on pension debt for taxpayers. There are a lot of details that are still unknown about this plan but it will be interesting to learn more as it could significantly increase the funded ratio and health of our Fund. by Kenneth A. Hauser, President THANK YOU & BEST WISHES President and Trustee Ken Hauser has announced he is retiring from the Pension Fund after 25 years of service. Ken served our Fund as trustee representing the patrol officers, trustee representing the retired officers and other annuitants, and also as our Pension Board President for many years. Ken brought a tremendous amount of knowledge and experience to the Pension Board and he will surely be missed at the Fund but we will definitely keep in touch. Thank you for your dedication and service to the Fund and I wish you and your family the very best. Take Care and Be Safe. For the past twenty-five years I have been honored to serve as a Trustee on the Chicago Police Pension Fund. This milestone seems an appropriate time to move on to other aspects of retirement (as my wife wholly agrees). I have, therefore, chosen not to seek another term as Pension Fund Trustee. Over the years, there have been many issues and challenges which I have always approached with the best interests of my fellow officers/ retirees and their families in mind. I want to thank all the Pension Fund staff for their years of dedication and especially all the Trustees that I have served with during these past twenty-five years. In addition, I would like to thank all those who placed their trust in my ability to represent them and wish all a long and healthy future. Pension Advisor 5

6 Pension Advisor is a publication of the Policemen s Annuity and Benefit Fund of Chicago. 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 OF CHICAGO PENSION ADVISOR 221 North LaSalle Street Suite 1626 Chicago, Illinois POLICEMEN S ANNUITY & BENEFIT FUND CITY OF CHICAGO 221 NORTH LASALLE STREET SUITE 1626 CHICAGO, ILLINOIS POLICEMEN S ANNUITY AND BENEFIT PENSION ADVISOR 221 N. LaSalle St., Suite 1626 Chicago, IL Telephone: (outside 312) Toll Free: RETIREMENT BOARD Kenneth A. Hauser, President Carol L. Hamburger, Vice President Managing Deputy Comptroller, City of Chicago, Appointed Member Regina Tuczak Executive Director Caroline Vullmahn Comptroller Aoifinn Devitt Chief Investment Officer Visit our website at: OFFICE HOURS: 8:30 A.M. - 4:30 P.M. MONDAY FRIDAY Brian E. Wright, Recording Secretary Carole L. Brown, Trustee, Chief Financial Officer, City of Chicago Appointed Member Edward M. Wodnicki, Trustee Thomas A. Beyna, Trustee Haydee Caldero, Trustee Appointed Member Kurt A. Summers, Jr. Trustee Treasurer, City of Chicago Appointed Member