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Monday, May 8, 2023

Appellate Court Interprets "Average Salary" Calculation in Demoted Sergeant's Application for Pension

An Illinois Appellate Court issued a ruling interpreting a provision in the Illinois Pension Code regarding the calculation of the "average" salary for purposes of determining the pension benefit amount. City of East Peoria v. Board of Trustees of Police Pension Fund.

A former police sergeant resigned his position in October of 2020 and requested that his pension benefits be "determined by the highest rate of pay within the last year." The prior September, he had been promoted to deputy chief but returned to the position of sergeant in December of 2019. The Pension Board approved his pension benefits, and calculated the amount based on his former rank of deputy chief. After the City filed a complaint to challenge the Pension Board's decision, the Pension Board held a second hearing, and reapproved the previous request that the sergeant's pension benefits be calculated based on his former rank of deputy chief. The Board reasoned that section 3-111(a) of the Pension Code protected against a diminishment in pension benefits for an officer who was demoted within a year of retirement.

The City again appealed to the circuit court, which upheld the Pension Board's determination. The City then appealed to the Appellate Court. The sole issue before the Appellate Court was whether the Pension Board misinterpreted section 3-111(a) of the Pension Code when it granted the sergeant a pension benefit based solely on the salary attached to the rank of deputy chief. 

The City argued that the Pension Code requires the pension benefits to be calculated based on the greater of (1) the salary attached to the rank held on the last day of service or (2) the salary received during the one year period prior to the last day of service. Here, the City argued the Pension Board should have calculated the pension benefits based on the latter method and averaged the monthly salary over the past year to come up with the pension benefit amount. 

The Pension Board and the former sergeant argued that section 3-111(a) requires a different calculation in a situation where an officer was demoted in the year prior to retirement. In this case, the Board argued that his pension benefits should be based solely on the salary attached to the highest rank earned during the last year of employment.

The Appellate Court rejected both arguments, instead finding that in a situation involving a demotion within the last year, the Pension Code permits a retiring officer's pension to be based on half of the salary attached to the combined rank held by the officer for one year prior to retirement. The Court rejected the City's argument of a "monthly average" method of calculation, finding it would not account for the full scope of longevity adjustment. The Court also rejected the Board's finding that the former sergeant was entitled to a pension based solely on the rank of deputy chief, which he only held for three of the last 12 months, because it didn't take into account the fact that the sergeant had been demoted.


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