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Village of Oak Brook v. Sheahan

Court of Appeals of Illinois, Second District

June 26, 2015

THE VILLAGE OF OAK BROOK, Plaintiff-Appellee,
v.
THOMAS SHEAHAN, Defendant-Appellant (Beth Janicki Clark, Louis W. Kosiba, Kathleen O'Brien, Linda Horrell, Thomas Riatt, and Sharon Brown, in their Official Capacities as Staff Members of the Illinois Municipal Retirement Fund Benefit Review Committee; Gwen Henry, Natalie Cooper, Thomas Kuehne, John Piechocinski, William Stafford, and Jeffrey Stulir, in their Official Capacities as Members of the Illinois Municipal Retirement Fund Benefit Review Committee and as Trustees of the Illinois Municipal Retirement Fund; and Sharon Thompson and Mark Nannini, in their Official Capacities as Trustees of the Illinois Municipal Retirement Fund; The Illinois Municipal Retirement Fund; and The Municipal Employees' Annuity and Benefit Fund of Chicago, Defendants).

NOT PRECEDENTIAL

Appeal from the Circuit Court of Du Page County. No. 13-MR-942 Honorable Terence M. Sheen, Judge, Presiding.

JUSTICE ZENOFF delivered the judgment of the court, with opinion. Justices McLaren and Hudson concurred in the judgment and opinion.

OPINION

ZENOFF JUSTICE

¶ 1 Defendant, Thomas Sheahan, was the chief of police for the Village of Oak Brook (Oak Brook) from March 21, 2005, to April 29, 2011. During his tenure, pursuant to section 3-109.1 of the Illinois Pension Code (40 ILCS 5/3-109.1 (West 2012)), he elected to participate in the Illinois Municipal Retirement Fund (IMRF). After Sheahan retired from Oak Brook and began receiving his pension, IMRF notified Oak Brook that Oak Brook had an unfunded pension liability of $746, 434.35, resulting from Sheahan's retirement. Oak Brook filed an administrative appeal with IMRF, which upheld the amount of the unfunded liability. Oak Brook then filed an administrative review action in the circuit court of Du Page County. The circuit court reversed IMRF's decision, ruling that Sheahan had improperly transferred service credit to IMRF from two other pension funds. Sheahan appeals. As explained below, we affirm the circuit court and reverse IMRF's decision.

¶ 2 I. BACKGROUND

¶ 3 Prior to becoming Oak Brook's police chief, Sheahan worked for the Village of Deerfield (Deerfield) from 1975 to 1988. During that time, he accrued 152 months of service credit in Deerfield's Police Pension Fund (Deerfield Fund), established under article 3 of the Pension Code (40 ILCS 5/3-101 et seq. (West 2012)). When he left his employment there, he received a refund of his contributions to the Deerfield Fund, thereby forfeiting his service credit.

¶ 4 Subsequently, Sheahan worked for the City of Chicago from 1998 to 2004. During that time, he accrued 77 months of service credit in the Municipal Employees' Annuity Benefit Fund of Chicago (MEABF), established under article 8 of the Pension Code (40 ILCS 5/8-101 et seq. (West 2012)). Sheahan's contributions remained in MEABF when he left his employment with the City of Chicago.

¶ 5 In March 2005, Sheahan became Oak Brook's police chief. Pursuant to section 3-109.1 of the Pension Code, he elected to participate in IMRF rather than in Oak Brook's article 3 pension fund. He thus became a "Sheriff's law enforcement employee" or "SLEP, " which section 7-109.3(a)(2) of the Pension Code defines as an individual who has elected to participate in IMRF pursuant to section 3-109.1. 40 ILCS 5/7-109.3(a)(2) (West 2012).

¶ 6 At the time, Sheahan completed IMRF Form 6.22, entitled "Election of Police Chief to Participate as a SLEP Member." In the space on the form for listing the police pension fund service that he wished to transfer to IMRF, Sheahan listed his Deerfield Fund service and his MEABF service. He checked a box to indicate that he had forfeited the Deerfield Fund service by receiving a refund of his contributions. Although IMRF sent Sheahan correspondence acknowledging his desire to transfer his prior service, no transfers occurred at the time.

¶ 7 Meanwhile, on August 28, 2007, the Governor signed into law Public Act 95-504 (eff. Aug. 28, 2007). Among other things, the public act created section 8-226.7 of the Pension Code (40 ILCS 5/8-226.7 (West 2008)) and amended section 7-139(a)(9) of the Pension Code (40 ILCS 5/7-139(a)(9) (West 2008)). Together, sections 8-226.7 and 7-139(a)(9) provided a six-month window during which any IMRF SLEP member could transfer service credit from an article 8 pension fund to IMRF. If a SLEP member applied for a transfer, the article 8 pension fund was required to transfer to IMRF the funds it had on its books for the applicant. 40 ILCS 5/8-226.7 (West 2008). The applicant, in turn, was required to pay the amount, plus interest, by which the contributions that would have been required if he or she had participated in IMRF as a SLEP member during the period in question exceeded the amount transferred to IRMF by the article 8 fund. 40 ILCS 5/7-139(a)(9) (West 2008).

¶ 8 On November 16, 2007, during the six-month window, Sheahan applied to transfer his 77 months of MEABF service credit to IMRF. IMRF informed Sheahan in a letter that the total amount that it required to transfer the service was $103, 996.41. Of that amount, MEABF was required to contribute $80, 759.18, and Sheahan was responsible for the remaining $23, 237.23. IMRF explained that "[a]ll monies must be transferred by May 28, 2008 in order to receive IMRF SLEP service credit as stated above." Shortly thereafter, MEABF transferred $80, 759.18 to IMRF; however, Sheahan did not contribute the remaining funds.

¶ 9 On April 11, 2011, IMRF again wrote to Sheahan regarding the transfer of his MEABF service. It informed him that he had "already established 60 months (or 5 years) of the service, " based on the payment from MEABF. It stated that 17 months of service remained to be purchased at a cost of $30, 662.73, including interest. Again, Sheahan never made the payment.

¶ 10 In April 2011, as Sheahan was preparing to retire as Oak Brook's police chief, he contacted Deerfield to inquire about buying back the 152 months of service credit that he had forfeited upon leaving his employment there. On April 14, 2011, Deerfield notified him that the cost to buy back the credit was $101, 895.60. On April 29, 2011, before repurchasing the Deerfield credit, Sheahan retired from his position as Oak Brook's police chief.

¶ 11 On May 3, 2011, Sheahan delivered a certified check to Deerfield to repurchase his service credit. Deerfield then gave him a check to deliver to IRMF, which he did the same day. On May 5, 2011, IMRF deposited the check and credited Sheahan with 152 months of service.

¶ 12 Sheahan then began receiving monthly pension payments of approximately $6, 396. Because he had 24 years of service credit in IMRF, including his transfers from the Deerfield Fund and MEABF, his pension equaled 2.5% of his final salary for each year of service, or a total of 60% of his final salary. 40 ILCS 5/7-142.1(a) (West 2012).

¶ 13 In November 2011, IMRF notified Oak Brook that it had an unfunded pension liability of $746, 434.35 resulting from Sheahan's retirement, based on actuarial calculations. It required Oak Brook to begin making annual payments in excess of $52, 000 to fund the pension.

¶ 14 Oak Brook requested a hearing before the IMRF Board of Trustees' Benefit Review Committee (Committee) to challenge the amount of the unfunded pension liability on the ground that Sheahan had improperly transferred his service credit from the Deerfield Fund and MEABF. Oak Brook and Sheahan submitted written and oral arguments, documentary evidence, and deposition testimony. Per IMRF rules, no live testimony was taken.

ΒΆ 15 The evidence included portions of IMRF's "Manual for Authorized Agents." Section 6.40A of the manual, entitled "General Requirements for Past Service Applications, " provided: "Payment for service credits must be received while the member is in an active IMRF status. However, one final payment may be made after termination." The manual defined "Active member" as a "participating member." It defined "Participating ...


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