Thursday, July 17th, 2014

Municipality Not Required to Follow Police Pension Board’s Funding Recommendation

The Village of Riverdale prevailed in a challenge against it for the Village’s admitted failure to follow the Police Pension Board’s recommendation for funding the police pension. The First District Appellate Court construed sections of the Pension Code to determine that the Code does not sustain a cause of action against a municipality “so long as there is no allegation or proof the fund is on the verge of default or imminent bankruptcy.”

Significant facts from the case are that the Village admitted that it funded the police pension less than the Pension Board recommended by amounts varying between $12,000 and $409,000 each year from 2003 to 2010. The Pension Board recommended funding based exactly on the Illinois Department of Insurance’s actuarial report. Furthermore, the Village admitted that it placed the pension funds in its general operations fund.

The Court’s determination was largely based on its interpretation that the Pension Code does not create an entitlement or other contractual right to the annual funding of a police pension by its beneficiaries. The Court acknowledged, however, that a cause of action may be pursued by beneficiaries when a “beneficiary has been denied benefits” or where the fund is alleged to be on the “verge of default or imminent bankruptcy.” The Pension Board’s complaint did not allege either recognized cause of action, and so the Village was not properly sued on that basis.

The Riverdale decision recognizes that a municipality has discretion in determining the annual funding of a police pension and is not bound by a pension board’s recommendation. However, Riverdale also held the municipality liable to the pension fund for the amount it placed and used in its general operation fund, and the Court recognized that a municipality could be sued for alleged underfunding which results in the denial of a pension beneficiary’s benefits or for having the fund on the verge of insolvency.


Brad Stewart

Author: Brad Stewart