Pension Board Has No Contract Right to a Specific Level of Municipal Funding

Pension Board Has No Contract Right to a Specific Level of Municipal Funding

  Thursday, July 17, 2014    Julie Tappendorf

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An Illinois appellate court recently held that a municipality was not liable for failing to fully fund its police pension fund, and that the Pension Board was not statutorily and contractually entitled to a specific level of funding by the Village.  Board of Trustees of the Riverdale Police Pension Fund v. Village of Riverdale.

The Board of Trustees of the Riverdale Police Pension Fund filed a lawsuit against the Village claiming that the Village violated its statutory obligations under the Illinois Pension Code to properly and fully fund the police pension by not levying the appropriate taxes for pension contributions for about 10 years.  The Pension Fund also asked the court to order the Village to turn over all pension contributions in its possession, which the Village admitted to collecting and inadvertently not remitting.  The circuit court granted summary judgment to the Village, finding that the Pension Code did not contain any right to enforce certain funding levels and that the “legislature could not have intended to remove all discretion from the municipality in determining the amount of tax levies and contributions to the pension funds in any particular year.” 

The Pension Fund appealed the decision to the appellate court.  That court first looked at Sections 3-125 and 3-127 of the Illinois Pension Code, and determined that although these provisions require a municipality to levy taxes sufficient to cover the cost of the pension fund of the given year and any unfunded accrued liabilities, the law does not require that taxes be levied in strict compliance with the recommended funding levels.  As a result, the court found that the Pension Board was not able to demonstrate that the Pension Code created a contractual right to a specific level of funding. The court did, however, determine that the Village was required to forward all monies actually received as a result of the pension tax levies to the Pension Board.

Post Authored by Tiffany Nelson-Jaworski, Ancel Glink