When I first became a trustee seven years ago, I would occasionally have members ask me if they could take a refund of their contributions from the pension fund. My answer was typically – “Don’t do it. But if you want to, as long as you are under 50 you can have your contributions refunded to you with interest.” My advice has always been that members should truly understand what they would be giving up by pulling their contributions from the pension fund. Even though our pension fund is severely underfunded, being a member of a defined benefit plan, backed by a large city with a dynamic economy is an unbelievable benefit. I have always advised members against pulling their money from the pension fund.
Members also ask if pension credits can be moved to a fire department in another state. The pension code doesn’t address that issue. But if an out-of-state pension system wants to accept your contributions, I don’t think our pension fund would have a problem providing documentation indicating how many years of service those contributions cover. In my opinion, as long as you timely transferred the funds to another qualified plan I don’t think there would be any tax consequences for the transfer. Whatever credit another pension system wants to give you is up to that pension system; our pension fund has no say in that matter. But to be clear, the pension code does not contain language that would allow you to take the City contributions made on your behalf or any investment earnings, you are only entitled to your contributions. The City contributions and investment returns are generally substantially more you’re your contributions, the pension code requires that those funds remain with the pension fund. And I don’t mean to be disrespectful, but I generally don’t see any fire department in this country having much need for an employee with 10+ years of service as a salty ghetto firefighter or paramedic with underfunded pension credits.
So my advice in the past has been to not focus of transferring your pension and experience to another department, appreciate what you have and make the best of what we have here by getting involved. There are still a lot of houses with a good group of members that are cohesive and passionate about the job. That alone is something to be grateful for and worthy of protecting and engaging in. The incompetence of the political class in this City and State can be overwhelming, but I still think being a first responder in this City and a member of Local 2 is a worthy position to be in and shouldn’t be discounted so quickly.
I understand with the recent handling of the pandemic and vaccination mandate by the City and Local 2 that many members are frustrated and just want to take their contributions and move. I know some members that have done just that – left the job, took their contributions and moved out of state. I personally know of a 6-year firefighter at a good working fire company that took his contributions and moved to Tennessee. If you read the pension fund monthly summary you would see that an 11-year firefighter took his $96,840 in contributions and left the job. And a 14-year engineer took his $112,177 in contributions and also left the job.
Some of the retired members I talk with do not understand or appreciate the attitude some of these active members are taking. The only thing I can say to these retired members is that the job has drastically changed in the last 10 years and that the decades of corruption that Local 2 has essentially embraced, have reached a tipping point. The public unions reap what they sow with their blind political loyalty, PAC contributions and petition signing drives. Today’s political class knows no bounds and has no shame in pushing any agenda, no matter how damaging it may be to the general welfare, as long as it benefits them politically. The fabric of Chicago’s working class ethos and pride isn’t just worn, there exists gaping holes. The absolute mishandling of this vaccine mandate exposed many members to the reality of their lack of standing or representation in this charade.
So I am not as comfortable as I once was telling members, with certainty, that pulling your pension contributions is a bad idea. For the most part, I still think it usually is a bad idea and the decision should not be made in haste. But you would have to be tone deaf to not hear the public discourse of the mass exodus and migration out of this once great City and State. If you are younger and not as vested in this job, this City, your neighborhood, or your kids are young enough to easily establish roots elsewhere, I can understand wanting to consider the freedom to reside elsewhere. But I think the better course of action would be to take advantage of the situation presented to Local 2 members. We belong to a union that once had a strong respected history in the labor movement. We are public servants in a department that the public truly loves and admires. We are numerous, and along with the police department, represent what could be a potentially potent voice in the political arena. Pendulums swing, and the overreach by the political class will have consequences. I suggest when that pendulum does change directions, that you are educated, involved and ready to engage with your union, whether it be at union meetings or when it is time to elect new union representation.
There is one caveat I need to address when it comes to pulling your pension contributions.
The general rule was that as long as members were under 50 years of age and have less than 20 years of service they could get a refund of their pension contributions. However, this summer Local 2 passed legislation that restricts your ability to pull your contributions from the pension fund. Under this new legislation, any member with more than 10 years of service have to leave their contributions in the pension fund. The two members mentioned above, with 11 and 14 years of service, would not have been able to take out their pension contributions after Local 2 passed this legislation; their contributions would have to remain with the pension fund.
I’m not sure why Local 2 did this. This will be the second time since I have been a trustee where Local 2 meddled in the pension code by sponsoring legislation without partnering with the pension fund. For those of you that might recall, Local 2 wrote legislation 6 years ago that provided a 3% cost of living allowance for members born between 1955 and 1966. The legislation was written by someone who didn’t understand the pension code, and the pension fund couldn’t implement the legislation as intended because it was poorly written. Well, Local 2 appears to have made that same mistake again. Local 2 essentially diminished benefits for certain members which goes against the Illinois Constitution’s Pension Protection Clause. If you are interested in the details, the changes Local 2 incorporated into the pension code can be found here:
https://ilga.gov/legislation/publicacts/fulltext.asp?Name=102-0293&GA=102
I appreciate that this issue may not affect you personally and therefore may not be relevant to you as a Local 2 member. But the real question every Local 2 member needs to ask themselves is this – “How did this happen? And will the issues that do directly affect me, such as healthcare or supporting law and order candidates, be handled in this same incompetent way?” The process of how things get done for the membership is important, it isn’t always about the end result. Process matters. In the past I’ve criticized the Local 2 Executive Board for failing to hold the City accountable for imprudent fiscal policies that put Local 2 members at risk. I would also criticize Local 2 for not knowing their capabilities and limitations. If you don’t know how the pension language works, don’t go changing it without checking with someone who does. If Local 2 isn’t failing to secure funding for our pensions as it falls below a 20% funding ratio, then they are meddling in the language of the pension code trying to “fix” things. It truly has become a shit show at 43rd Street. Pay attention brothers and sisters, the best way to change this political culture is through your Union, and in order to do that you have to change your Union – make the Union do their job and represent us. Stay Safe! Be Well!
Lt. Timothy McPhillips
Pension Fund Trustee
This newsletter is my opinion only and clearly is not the opinion of the Retirement Board of the Firemen’s Annuity and Benefit Fund.
