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11/03/95 TAKAYOSHI MATSUDA v. COOK COUNTY

November 3, 1995

TAKAYOSHI MATSUDA, PLAINTIFF-APPELLANT,
v.
THE COOK COUNTY EMPLOYEES' AND OFFICERS' ANNUITY AND BENEFIT FUND, AND THE RETIREMENT BOARD OF THE COUNTY EMPLOYEES' ANNUITY AND BENEFIT FUND OF COOK COUNTY, DEFENDANTS-APPELLEES.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE EVERETTE A. BRADEN, JUDGE PRESIDING.

Presiding Justice McNAMARA delivered the opinion of the court: Egan and Zwick, JJ., concur.

The opinion of the court was delivered by: Mcnamara

PRESIDING JUSTICE McNAMARA delivered the opinion of the court:

Plaintiff, Dr. Takayoshi Matsuda, a retired employee of Cook County Hospital, brought this action to compel the establishment of an excess benefit fund from which plaintiff would receive payment of certain pension benefits owed to him for accepting early retirement under the Illinois Pension Code. Defendants, the Cook County Employees' and Officers' Annuity and Benefit Fund (Cook County Fund) and the Retirement Board of the County Employees' Annuity and Benefit Fund of Cook County (Retirement Board), together filed a combined motion to dismiss and motion for summary judgment. The trial court denied the motion to dismiss, but granted defendants' motion for summary judgment, ruling that Federal law does not permit defendants to establish an excess benefit fund. Plaintiff appeals the trial court's granting of summary judgment for defendants. We reverse and remand.

On May 29, 1993, plaintiff, a physician employed by Cook County Hospital for 24 years, retired at age 55. As an employee of Cook County, plaintiff was a contributing member of defendant Cook County Fund, an annuity and benefit fund established and operated under article 9 of the Illinois Pension Code. (40 ILCS 5/9-101 et seq. (West 1992).) Pursuant to section 9-185 of the Illinois Pension Code, defendant Retirement Board was created to carry out the provisions of article 9 for members of Cook County Fund. 40 ILCS 5/9-185 (West 1992).

On September 16, 1992, the Illinois General Assembly made early retirement incentives available to certain members of Cook County Fund. Pursuant to newly added section 9-134.2 of the Illinois Pension Code, titled "Early retirement incentives," any contributing member who (1) filed a written application requesting the early retirement incentives before May 1, 1993, (2) elected to retire between December 1, 1992, and May 29, 1993, (3) was at least 55 years of age on such retirement date, and (4) had at least 10 years of service prior to retirement would become entitled to receive a specified increase in the employee's retirement annuity without any reduction in benefits otherwise caused by retiring below age 60. 40 ILCS 5/9-134.2 (West Supp. 1993).

On November 4, 1992, defendants mailed to plaintiff unsolicited information discussing the requirements and advantages of the above early retirement incentives. On November 23, 1992, defendants then mailed to plaintiff an estimated personal benefit statement subject to final audit. The estimate calculated that if plaintiff acted on the early retirement incentives and made additional contributions of $62,954.39, plaintiff would receive an estimated monthly annuity of $9,899.37. On April 30, 1993, plaintiff, who met all the applicable requirements, filed an early retirement application stating that he would retire on May 29, 1993. Defendants thereafter sent plaintiff another estimated personal benefit statement subject to audit. This estimate, dated May 13, 1993, calculated that if plaintiff took early retirement and made additional contributions of $60,317.84, plaintiff's monthly annuity would amount to $9,967.31. On May 26, 1993, plaintiff contributed $60,317.84, and on May 29, 1993, he retired.

Sometime after filing his application on April 30, 1993, but before May 29, 1993, plaintiff was orally advised by a representative of defendants that plaintiff's retirement benefits would be subject to some undetermined ceiling as a result of section 415 of the Internal Revenue Code of 1986. (26 U.S.C. § 415 (1988).) Months later, by letter dated September 1, 1993, defendants notified plaintiff for the first time in writing that his monthly annuity would amount to $7,219.85, substantially lower than previously estimated. In a letter dated October 1, 1993, defendants attributed this reduction in plaintiff's annuity to limitations set forth in section 415 of the Internal Revenue Code for qualified retirement plans. 26 U.S.C. § 415 (1988).

On December 23, 1993, plaintiff filed a two-count complaint against defendants. Count I alleged that defendants violated section 1-116 of the Illinois Pension Code by failing to establish an excess benefit fund to pay out the benefits promised to plaintiff that exceeded any limits set by section 415 of the Internal Revenue Code. Count II alleged that by their conduct and plaintiff's reliance thereon, defendants were estopped from objecting to establishing such an excess benefit fund. Defendants did not answer the complaint. Instead, on February 3, 1994, defendants together filed a combined motion to dismiss and motion for summary judgment.

In their motion to dismiss, defendants asserted that the trial court lacked jurisdiction. The trial court denied the motion to dismiss, and that ruling has not been appealed. In their motion for summary judgment, defendants did not contest any facts, but asserted that, as a matter of Federal law, they are not allowed to establish an excess benefit fund. The trial court granted defendants' motion for summary judgment, holding "that the court interprets the statute in favor of defendant[s] as to Count I," and in effect, "as to Count II, the estoppel would not operate" because "it would be requiring defendant[s] to do something [they're] not required to do."

Plaintiff appeals the trial court's ruling. The issue on review is whether defendants are prohibited by Federal law from establishing an excess benefit fund pursuant to section 1-116 of the Illinois Pension Code in a situation such as this where the pension benefits owed exceed the limits set by section 415 of the Internal Revenue Code for a qualified retirement plan. Resolution of this technical issue requires setting forth the relevant Illinois Pension Code sections and the pertinent language of section 415 of the Internal Revenue Code.

As a former employee of Cook County, plaintiff's retirement benefits are controlled by article 9 of the Illinois Pension Code. Section 9-150 of this article states the following:

"§ 9-150. Maximum annuities.

(3) Notwithstanding any other provision of this Article, any benefit payable under this Article which would otherwise exceed the maximum limitations on benefits provided by 'qualified plans' as set forth in Section 415 of the federal Internal Revenue Code of 1986, as now or hereafter amended, or any successor thereto, shall be ...


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