Carmichael v. Laborers' & Retirement Board Employees' Annuity & Benefit Fund
2018 IL 122793
| Ill. | 2019Background
- Plaintiffs are current and retired participants (and a survivor) in three City of Chicago pension funds (LABF, MEABF, CTPF) who historically could purchase "union service" credit and, in many cases, have pensions calculated using union salaries earned while on leave from public employment.
- Public Act 97-651 (eff. Jan. 5, 2012) (1) barred earning union service credit for leaves beginning after the Act's effective date and (2) declared only salaries paid by defined public employers could be used to compute the "highest average annual salary," and (3) added an alternative formula using pre-leave salaries indexed for inflation when union salary would otherwise have been used.
- Plaintiffs sued, claiming the Act diminished protected pension benefits in violation of the Illinois Constitution art. XIII, §5 (pension protection clause), and raised contract/takings and statutory-construction claims; the State and pension funds defended.
- The circuit court held the provision eliminating future ability to earn union service credit unconstitutional under the pension clause, but initially ruled the "highest average annual salary" amendment merely clarified existing law (later reconsidered). It denied plaintiffs' estoppel/prospective-relief claims and rejected plaintiffs' reading that "any pension plan" excludes defined-contribution plans.
- The parties appealed directly to the Illinois Supreme Court; the Court addressed (a) constitutionality of eliminating the right to earn future union service credit, (b) whether the Act unlawfully changed the law on use of union salaries in the highest-average calculation, and (c) whether "any pension plan" covers defined-contribution plans.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether eliminating the future ability to purchase union service credit (for leaves beginning after Jan. 5, 2012) violates the pension protection clause | The right to purchase union service credit was a benefit of membership and thus protected; the amendment unconstitutionally diminished that benefit for existing members | The benefit is not constitutionally protected because it is not based on public service or designed to encourage future public service; legislature may change pension benefits | Held for plaintiffs: the right to earn union service credit is a pension benefit derived from membership and cannot be diminished as to existing members (pension clause violation) |
| Whether the Act's amendment barring use of union salaries to calculate the "highest average annual salary" was a permissible clarification or an unconstitutional change | Plaintiffs: pre-Act Pension Code was ambiguous but permissive of using union salaries; the amendment changed law and diminished benefits | State: statutes always limited "salary" to public-employer pay; amendment merely clarifies existing law and may be applied retroactively | Held for plaintiffs: pre-Act provisions were ambiguous and must be construed in favor of pensioners to allow use of union salary; the amendment changed the law and thus violated the pension clause when applied to existing members |
| Whether the phrase "receive credit in any pension plan" (40 ILCS 5/8-226(c)(3)) includes defined-contribution plans | Plaintiffs: "pension plan" in ordinary/legal usage means defined-benefit pension (regular, determinable retirement payment based on years/salary); the statute should not bar participation in defined-contribution plans | Funds/State: the modifier "any" is expansive and can include defined-contribution plans (ERISA uses a broad definition) | Held for plaintiffs: term "pension plan" is ambiguous; under pension statutes ambiguity resolves for pensioner protection, so "any pension plan" does not include defined-contribution plans |
Key Cases Cited
- Kanerva v. Weems, 2014 IL 115811 (pension statutes ambiguous must be construed in favor of pensioners; broad protection under pension clause)
- In re Pension Reform Litigation (Heaton), 2015 IL 118585 (pension-clause protections attach on commencement of covered employment; benefits thereafter cannot be diminished)
- Buddell v. Board of Trustees, 118 Ill. 2d 99 (1987) (statutory extensions to purchase service credit are protected once offered to members)
- Jones v. Municipal Employees’ Annuity & Benefit Fund, 2016 IL 119618 (pension-clause scope includes benefits attendant to membership)