Chicago police officers were hit with a payroll error that requires approximately 3,000 Tier 2 members of the Policemen’s Annuity and Benefit Fund of Chicago to pay back a salary cap correction, plus interest. The error was due to a fiscal year discrepancy with the city, caused by a retroactive salary contract payment from a new contract approved in late 2023. Union members received a 2.5% base salary increase, but the city did not deduct the correct 9% pension contribution from their paychecks.
The Fraternal Order of Police, Lodge 7, which represents most rank-and-file cops, plans to file a grievance over the error in hopes that the city will pay the interest charge instead of the workers. Members are required to sign a letter of acknowledgement and cut a check to the PABF for the salary cap correction by Aug. 31. Failure to pay will result in the original amount, plus interest, being withheld from pensioners’ annuity payments upon retirement. The union is considering a class-action grievance to demand that the city cover the 3% interest charge.
FOP President John Catanzara blamed the error on the CPD’s Finance Department’s incompetence and criticized the pension fund for not alerting members to the issue sooner. He argued that since workers paid state and federal income tax on the earnings in question, the city should also refund the equivalent amount of taxes charged on that income. The PABF, one of the most poorly funded city pension funds, currently has enough assets to cover only 21.76% of its obligations through the end of 2022.
The error mainly affects Tier 2 members of the PABF, who started working for the CPD on or after Jan. 1, 2011. These members contribute 9% of their salary to their pension fund, which is automatically withdrawn from paychecks. The city’s failure to deduct the correct amount during the retroactive salary payment led to the current situation. Members are facing a range of charges, from around $80 to $1,300, depending on individual circumstances.
The PABF executive director, Kevin Reichart, attributed the error to a fiscal year discrepancy with the City of Chicago. Due to the retroactive salary contract payment, the city counted the funds towards the 2022 annual salary cap, resulting in the shortfall in pension contributions. Reichart did not respond to requests for comment on the issue, nor did the city’s Finance Department. Members have expressed disappointment with the situation and frustration with the lack of communication from relevant parties on the matter.
Overall, the payroll error affecting Chicago police officers highlights the challenges faced by the Policemen’s Annuity and Benefit Fund of Chicago, as one of the city’s lowest-funded pension funds. The need for Tier 2 members to rectify the salary cap correction, along with interest charges, has raised concerns among union members and officials. Efforts are being made to address the issue through potential grievances and demands for the city to cover the interest charges imposed on the workers. The situation underscores the complexities and difficulties associated with managing pension funds and ensuring accurate financial transactions for public sector employees.
