A Sangamon County judge has sided with the city of Springfield in ruling that retiring city employees can’t cash out accrued vacation time to increase final paychecks and thus boost pension benefits.
In almost all cases, pensions are based on the size of salaries earned during final years of employment. Several unions sued the city after the city council last year passed an ordinance barring the payment of pension benefits based on final paychecks inflated by employees cashing out unused vacation.
The city began the practice of including vacation cash-outs more than 10 years ago in an effort to induce early retirements that would save money for the city. Unions had argued that ending the benefit amounted to violating the state constitution’s ban on unilaterally diminishing pension benefits for public employees.
Not so, ruled Sangamon County Associate Judge Chris Perrin.
“It is a local employer-generated policy that is available to all city employees,” Perrin wrote in his decision. “It is derived solely from city ordinance and employment with the city of Springfield.”
The Illinois Municipal Retirement Fund filed friend-of-the-court briefs in support of the city. The IMRF in 2012 began billing the city for pension benefits paid due to vacation cash-outs by retiring employees, and the city paid out $3.5 million in less than three years.
Don Craven, attorney for the unions, said that no decision has been made on whether to appeal Perrin’s decision filed last week.
“What happens next is, I talk to my clients,” Craven said.
In a memo to aldermen, corporation counsel Jim Zerkle said that the ramifications of Perrin’s ruling could extend beyond Springfield.
“This is a significant decision that will potentially impact other municipalities and IMRF members in their financial decisions and flexibility,” Zerkle wrote.
Via email, Ward 7 Ald. Joe McMenamin, who has been the city council’s most vocal advocate for taking action to address the city’s pension debt, lauded the court decision. He noted that the firefighters pension board recently asked a judge to rule on whether holiday pay can be used to calculate pension benefits, and he said that Perrin’s ruling suggest that a court will rule that holiday pay can’t be counted when determining pension benefits, which would cut costs for the city.
“Judge Perrin’s opinion is a major legal victory for the city and taxpayers,” McMenamin wrote. “It sets an important precedent for the entire state. It also sets forth the legal reasoning that is relevant to the Springfield fire pension dispute involving holiday pay that inflates pensionable rates of pay, which should likewise result in a favorable ruling for the city.”
Contact Bruce Rushton at brushton@illinoistimes.com.
This article appears in May 5-11, 2016.
