Carmichael v. Laborers' & Retirement Board Employees' Annuity & Benefit Fund of Chicago

2018 IL 122793

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

(Docket Nos. 122793, 122822)

ROCHELLE CARMICHAEL et al., Appellees and Cross-Appellants, v. LABORERS’ &

RETIREMENT BOARD EMPLOYEES’ ANNUITY & BENEFIT FUND

OF CHICAGO et al., Cross-Appellees (The State of Illinois ex rel. Lisa

Madigan, Attorney General, Appellant and Cross-Appellee).

Opinion filed November 29, 2018.

JUSTICE THOMAS delivered the judgment of the court, with opinion.

Chief Justice Karmeier and Justices Kilbride, Garman, Burke, Theis, and

Neville concurred in the judgment and opinion.

OPINION

¶1 This case involves challenges to the applicability and constitutionality of Public

Act 97-651 (eff. Jan. 5, 2012), which altered articles 8, 11, and 17 of the Illinois

Pension Code (40 ILCS 5/arts. 8, 11, 17 (West 2012)). The individual plaintiffs are

nine retired or working employees (or in one instance a surviving spouse of a

deceased former employee) of the City of Chicago (City) or Chicago Board of

Education. These individual plaintiffs are all participants 1 in one of three public

pension funds—the Laborers’ and Retirement Board Employees’ Annuity and

Benefit Fund of Chicago (LABF), the Municipal Employees’ Annuity and Benefit

Fund of Chicago (MEABF), and the Public School Teachers’ Pension and

Retirement Fund of Chicago (CTPF). These three public pension funds, along with

their governing boards, are named as defendants (hereinafter also referred to

collectively as the Funds). Additionally three local labor organizations intervened

as union plaintiffs.

¶2 The parties eventually filed cross-motions for summary judgment in the circuit

court of Cook County. Plaintiffs challenged the constitutionality of three reforms in

Public Act 97-651 that modify the calculation of annuities. The Attorney General

appeared on behalf of the State of Illinois and intervened as a defendant to defend

the constitutionality of Public Act 97-651, while the Funds argued against

jurisdictional, declaratory, and equitable claims raised by plaintiffs. In the course of

granting in part and denying in part the competing motions for summary judgment,

the circuit court invalidated two distinct provisions of Public Act 97-651, ruling

that they violated the pension-protection clause of the Illinois Constitution (Ill.

Const. 1970, art. XIII, § 5). 2 The circuit court upheld the constitutionality of the

third reform of Public Act 97-651 challenged by plaintiffs. The parties appealed

directly to this court, and we consolidated the two appeals.

¶3 BACKGROUND

¶4 The Funds calculate pension annuities for their participants through a formula

established by the Illinois Pension Code in articles 8 (governing the MEABF), 11

(governing the LABF), and 17 (governing the CTPF). The inputs for the formula

are derived from the years of service of an employee, dictating the percentage of the

employee salary, multiplied by the highest average annual salary in the last few

years before retirement. See, e.g., 40 ILCS 5/8-138(g-1), 11-134(f-1), 17-116

(West 2010). Participants thus have incentives to serve as public employees for

1

Or, as is the case with one of the plaintiffs, a survivor of a participant.

2

Only one of the two provisions found unconstitutional by the circuit court is at issue in this

appeal.

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long stretches of their careers to obtain the highest percentage and to increase their

salaries to obtain a higher annuity. For decades, members in the three defendant

pension Funds had the right to contribute to the Funds to receive service time for

employment with private unions while on leaves of absence from their public

positions with the City or the Chicago Board of Education. Participants were also

able to apply their higher private union salary to the public annuity calculation.

¶5 Before Public Act 97-651, a teacher participating in the CTPF who wanted to

earn union service credit had to receive a leave of absence from the Chicago Board

of Education to work for a labor organization. Id. § 17-134(4). The teacher was also

required to make the statutory employee contributions to the CTPF based on the

percentage of the teacher’s salary earned from the labor organization. Id. If the

teacher’s union salary exceeded the salary he would have earned in his Chicago

Board of Education position but for the leave of absence, the labor organization

was required to contribute “to the [CTPF] the employer’s normal cost as set by the

[CTPF] Board on the increment.” Id. There was no limitation on when the teacher

had to begin his union leave of absence to earn union service credit.

¶6 The requirements for earning union service credit in the LABF and MEABF

differed somewhat from the CTPF. Before Public Act 97-651, LABF and MEABF

participants could receive credit for “[l]eaves of absence without pay *** during

which a participant is employed full-time by a local labor organization that

represents municipal employees.” Id. § 8-226(c); see also id. § 11-215(c)(3). To do

so, the participant, or the labor organization on the participant’s behalf, had to make

all of the “employee” and “employer” contributions to the Funds. Id. §§ 8-226(c),

11-215(c)(3). Those contributions were “based on his current salary with such

labor organization.” Id. The participant could earn union service credit only if “the

participant does not receive credit in any pension plan established by the local labor

organization based on his employment by the organization.” Id. As in the CTPF,

there was no restriction in the Pension Code regarding when the LABF or MEABF

participant had to begin his leave of absence in order to earn union service credit.

¶7 Following negative press coverage, the General Assembly made a number of

changes to these union service credit benefits, two of which are at issue in this

appeal.

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¶8 First, Public Act 97-651 (Act) (eff. Jan 5, 2012) eliminated a participant’s right

to contribute to the Funds and earn union service credit for a leave of absence

beginning after the effective date of the Act, January 5, 2012. Before the Act, there

was no restriction on when a participant had to begin a leave of absence in order to

contribute to the Funds to earn union service credit.

¶9 Second, the Act amended the LABF and MEABF articles to state that only a

salary paid by one of the defined public employers could be used to calculate the

“highest average annual salary” upon which participants’ pensions were based.

Applicable to LABF, the General Assembly added a new subsection (e) to section

11-217 of the Pension Code to provide as follows: “This Article shall not be

construed to authorize a salary paid by an entity other than an employer, as defined

in Section 11-107, to be used to calculate the highest average annual salary of a

participant. This subsection (e) is a declaration of existing law and shall not be

construed as a new enactment.” 40 ILCS 5/11-217(e) (West 2012). The Act made

an essentially identical amendment applicable to the MEABF. See id. § 8-233(e).

As defined by articles 8 and 11, an “employer” under the Pension Code only

includes public employers such as the City or the Chicago Board of Education. Id.

§§ 8-110, 11-107.

¶ 10 The legislative amendments ended the LABF and MEABF boards’

decades-long practice of calculating pensions using union salaries earned by the

participants on leaves of absence and upon which their contribution to the Funds

were based. In both systems, pensions are generally calculated by multiplying the

participants’ years of service credit by a statutory multiplier (2.4%) and by the

participants’ “highest average annual salary for any 4 consecutive years in the last

10 years of service.” 40 ILCS 5/8-138(g-1), 11-134(f-1) (West 2010); see also id.

§§ 8-138(b), 11-134(a). If a participant’s union salary from a leave of absence

during which he contributed to the Funds for union service credit was among the

highest consecutive 4 years in the last 10 years of service before retirement, the

LABF and MEABF boards calculated that “highest average annual salary” using

the union salary.

¶ 11 The legislature’s purported “clarification” of the law, in adding new

subsections (specifically, sections 8-233(e) and 11-217(e)) to provide that only a

salary paid by a defined public employer could be used to calculate “highest

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average annual salary,” required additional changes to the Pension Code as it

existed before Public Act 97-651. This is because a member on a leave of absence

working for a union in his last years of service before retirement does not earn a

salary from a public employer upon which a pension could be calculated under the

above-noted amendments without more. The void was filled by Public Act

97-651’s amendment to section 8-138(g-1) and section 11-134(f-1) to provide that

“final average salary” be calculated by using the salary before the leave of absence

and adding an adjustment for inflation based on the Consumer Price Index for each

year of the leave of absence. Pub. Act 97-651 (eff. Jan. 5, 2012) (amending 40

ILCS 5/8-138(g-1), 11-134(f-1)).

¶ 12 Thus, under the amendments, when a participant has union service credit, his

pension would not be based upon the salaries he actually earned and upon which he

contributed to one of the Funds in his last 10 years of service. Instead, the pension

would be calculated based on the salaries he earned before the leave of absence

began plus an inflation adjustment. In cases where the participant had been on an

extended leave, these salaries from before the leave of absence began would have

been earned by the participant years or even decades before his actual retirement.

Those pre-leave-of-absence salaries could, therefore, be substantially less than the

union salary the participant earned and upon which he contributed to the fund

immediately before retirement.

¶ 13 Plaintiffs filed a multicount complaint against the Funds, alleging that plaintiffs

worked for the City or Chicago Board of Education for years, or even decades,

before taking leaves of absence to work for their unions to represent their

coworkers in collective bargaining. Counts IA, IIA, and IIIA of plaintiffs’

complaint alleged that the amendments of Public Act 97-651 discussed above

unconstitutionally diminished and impaired their retirement-system benefits in

violation of the pension clause of the Illinois Constitution by (1) taking away the

benefit of earning service credit for a future union leave of absence and (2) taking

away the possibility of using a union salary to calculate “highest average annual

salary.” The complaint also alleged that the amendments violated the contracts and

takings clauses of both the Illinois and United States Constitutions. Unrelated to the

amendments accomplished by Public Act 97-651, plaintiffs also sought a

declaration that language in section 8-226(c)(3) of the Pension Code (40 ILCS

5/8-226(c)(3) (West 2012)), barring union service credit for any participant who

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receives credit in “any pension plan” established by a local labor organization, does

not apply to defined contribution plans.

¶ 14 The Attorney General on behalf of the State of Illinois intervened in the

litigation to defend the constitutionality of the amendments and, joined by the

defendant Funds, moved to dismiss plaintiffs’ constitutional claims. On November

27, 2013, the circuit court entered an order denying defendants’ motion to dismiss,

finding that the right to earn union service credit was a retirement system benefit

protected by the pension clause of the Illinois Constitution even if the participant

had not exercised the option to take a leave of absence and earn union service credit

before the amendments. The circuit court’s order also denied defendants’ motion to

dismiss with respect to the question involving “highest annual salary calculations.”

The State had argued that the amendments did not change the law and insisted that

pre-existing statutory definitions of “salary” had always limited salary to one paid

by a public employer. Rejecting that argument, the circuit court held that the

definitions of “salary” in the Pension Code did not foreclose the use of the local

labor organization salary in the calculation. The court concluded that, before the

Act, the language of the statutes established that the legislature intended that LABF

and MEABF members could calculate a pension based on the union salary that the

participant actually earned during the leave of absence and upon which he

contributed to the Funds. Thus, the Act’s amendments changed the law,

unconstitutionally diminishing plaintiffs’ retirement system benefits.

¶ 15 The State filed a motion to reconsider the circuit court’s rulings of

unconstitutionality. On February 14, 2014, the circuit court denied the State’s

motion to reconsider its rulings with respect to the Act’s amendments that

eliminated the right to earn union service credit for leaves of absence after the

effective date of the Act. In an order entered on September 29, 2014, however, the

circuit court granted the State’s motion to reconsider with regard to the

amendments governing the calculation of “highest average annual salary.” The

court ruled that long-standing definitions of “salary” found in articles 8 and 11 of

the Pension Code that preexisted Public Act 97-651 did indeed limit a “salary” to

one paid by a public employer. Thus, despite decades of application of the statutes

by the LABF and MEABF before the amendments to include the union salary in the

calculation, the circuit court concluded that a highest average annual salary could

not be calculated by using a salary paid by a local labor organization. Accordingly,

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the circuit court dismissed plaintiffs’ claims challenging the “highest annual

average salary” clarification by the legislature.

¶ 16 Following discovery and the filing of a first supplemental complaint by

plaintiffs, the parties filed cross-motions for summary judgment. In a final order

dated July 14, 2017, the circuit court ruled on the parties’ motions. The court

granted summary judgment for plaintiffs on count IA, IIA, and IIIA, which stated

the pension clause challenges to the amendments eliminating the right to earn union

service credit for leaves of absence beginning after the effective date of the Act.

The State appeals directly to this court the judgment for plaintiffs on those counts.

¶ 17 In their supplemental complaint, plaintiffs alleged two new declaratory

judgment counts (counts XIII and XIV) seeking to bar retroactive application of the

amendments so that they would not impact the long-standing interpretation of the

LABF and MEABF to allow use of a union salary in the “highest average annual

salary” calculation. Plaintiffs alleged that, given members’ reasonable detrimental

reliance on the LABF and MEABF boards’ decades-long application of those

statutes, equity required a prospective-only application of the court’s new and

unanticipated interpretation of the Pension Code prohibiting the practice. Plaintiffs

asked the court to declare the Funds’ practice, combined with the participants’

contributions to the Funds based on their union salaries (rather than the lower salary

of their former public jobs), creates enforceable contractual rights that inform the

interpretation and restrict the application of the “highest average annual salary”

rules that are now being said to apply because of the amendments. Plaintiffs also

asked the circuit court to declare that the LABF and MEABF were equitably

estopped from applying the new interpretation based on the amendments to

individuals who were members of the system before the Act. The circuit court

granted summary judgment in favor of defendants on these supplemental counts

XIII and XIV and denied plaintiffs’ cross-motion for summary judgment, finding

that the relief requested was barred by the court’s earlier interpretation of the

“highest average annual salary” rules, despite the Funds’ 20-year practice to the

contrary. The court also rejected plaintiffs’ argument for prospective-only

application. Plaintiffs appeal all of those rulings directly to this court, including the

dismissal of their claims alleging that the change in the law denying a union salary

in the calculation of “highest average annual salary” violated the pension clause of

the Illinois Constitution.

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¶ 18 With respect to plaintiffs’ request for a declaration that section 8-226(c)(3) did

not apply to defined contribution plans, in contrast to defined benefit plans, the

circuit court rejected plaintiffs’ argument and granted summary judgment for the

Funds on this issue (counts X and XII of plaintiffs’ complaint). Section 8-226(c)(3)

provides that a participant may only earn union service credit in the MEABF if “the

participant does not receive credit in any pension plan established by the local labor

organization based on his employment by the organization.” Id. Plaintiffs argued

before the circuit court that in a defined benefit plan, such as the MEABF, a

participant receives a fixed regular payment of a pension based on the participants’

years of service credit and other factors such as salary and age. In a defined

contribution plan, however, the participant is not guaranteed a fixed and regular

pension payment based on years of service. Rather, the participant receives only the

value of contributions and investment returns in his individual account. The circuit

court rejected plaintiffs’ argument, placing great weight on the modifier “any” and

concluding that plaintiffs were “not seeking a mere liberal construction of an

ambiguous provision, but the outright insertion of limiting terms to the otherwise

clear and general phrase ‘any pension plan.’ ”

¶ 19 The State appealed directly to this court pursuant to Illinois Supreme Court

Rule 302(a) (eff. Oct. 4, 2011), seeking reversal of the circuit’s order granting

summary judgment for plaintiffs on counts IA, IIA, and IIIA, which found that the

statutory amendments eliminating the right to earn union service credit for leaves

of absence beginning after the effective date of the amendments violates the

pension clause of the Illinois Constitution. Plaintiffs also sought direct appeal in

this court pursuant to Rule 302(b) (which we granted), seeking review of the circuit

court’s denial of their claims (1) challenging the amendment disallowing the use of

union salary in the calculation of “highest average annual salary” and (2) seeking a

declaration that the “any pension plan” language of section 8-226(c)(3) of the

Pension Code does not include a defined contribution plan. We have consolidated

the parties’ appeals and will address the State’s appeal first.

¶ 20 ANALYSIS

¶ 21 Summary judgment is warranted where there is no genuine issue of material

fact and the moving party is entitled to judgment as a matter of law. 735 ILCS

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5/2-1005(c) (West 2012). By filing cross-motions for summary judgment, the

parties extend an invitation to the court to decide the questions presented as a

matter of law. Nationwide Financial, LP v. Pobuda, 2014 IL 116717, ¶ 24. We

review summary judgment rulings de novo. Bremer v. City of Rockford, 2016 IL

119889, ¶ 20.

¶ 22 I. Elimination of Union Service Credit for Leaves of Absence

¶ 23 Before this court, the State argues that the circuit court erred in finding that the

future ability to earn service credit for private employment in a labor organization

is protected by the pension clause of the Illinois Constitution. According to the

State, the drafters of the constitution and the voters that ratified it could not have

intended to offer constitutional protection to such a benefit where the benefit is not

actually based on public service and does not encourage future public service.

¶ 24 We note that statutes are presumptively constitutional and the party challenging

the validity of a statute bears the burden of rebutting this presumption by

establishing a clear constitutional violation. McElwain v. Office of the Illinois

Secretary of State, 2015 IL 117170, ¶ 14. We will uphold the constitutional validity

of a statute whenever reasonably possible. Id. It is well established, however, that,

where there is any question as to the legislative intent and clarity of the language of

a pension statute, it must be liberally construed in favor of the rights of the

pensioner. Kanerva v. Weems, 2014 IL 115811, ¶ 55. This rule applies “with equal

force” to interpretations of the provisions of the pension protection clause of our

state constitution. Id. Thus, to the extent that there may be any lingering doubt

about the meaning or effect of the provisions at issue in this case, we must resolve

that doubt in favor of the members of this State’s public retirement system. Id.

¶ 25 Here, the circuit court held Public Act 97-651 unconstitutional to the extent that

it took away a retirement benefit that the legislature had previously granted—the

right to claim union service credit—in violation of the pension protection clause.

Article XIII, section 5, of the Illinois Constitution sets forth the pension clause as

follows:

“Membership in any pension or retirement system of the State, any unit of

local government or school district, or any agency or instrumentality thereof,

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shall be an enforceable contractual relationship, the benefits of which shall not

be diminished or impaired.” Ill. Const. 1970, art. XIII, § 5.

Under this language, if something qualifies as a benefit of the enforceable

contractual relationship resulting from membership in one of the pension or

retirement systems of any unit of local government or school district of the State,

“ ‘it cannot be diminished or impaired.’ ” In re Pension Reform Litigation, 2015 IL

118585, ¶ 45 (Heaton) (quoting Kanerva, 2014 IL 115811, ¶ 38). This includes all

pension benefits that flow directly from membership. Kanerva, 2014 IL 115811,

¶ 40. The benefits protected by the pension protection clause include those benefits

attendant to membership in the State’s retirement system, such as subsidized health

care, disability and life insurance coverage, and eligibility to receive a retirement

annuity and survivor benefits (see Jones v. Municipal Employees’ Annuity &

Benefit Fund, 2016 IL 119618, ¶ 36; Kanerva, 2014 IL 115811, ¶¶ 39, 41), along

with the right to purchase optional service credit in the state pension system for past

military service (see Buddell v. Board of Trustees, 118 Ill. 2d 99, 105-06 (1987)).

¶ 26 The protections afforded by our constitution to such benefits attach once an

individual begins employment in a position covered by a public retirement system,

not when the employee ultimately retires. Heaton, 2015 IL 118585, ¶ 46.

Therefore, once a person commences to work and becomes a member of a public

retirement system, any subsequent changes to the Pension Code that would

diminish the benefits conferred by membership in the retirement system cannot be

applied to that person. Id. Heaton further emphasized that

“[a]dditional benefits may always be added, of course [citation], and the State

may require additional employee contributions or other consideration in

exchange [citation]. However, once the additional benefits are in place and the

employee continues to work, remains a member of a covered retirement system,

and complies with any qualifications imposed when the additional benefits

were first offered, the additional benefits cannot be unilaterally diminished or

eliminated.” Id. ¶ 46 n.12.

¶ 27 It is undisputed that, when plaintiffs began their employment and became

members of the public pension system, they had the statutory right to count time

spent on leave of absence with their local labor organization in their annuity

calculations. The benefit plaintiffs seek to enforce is their right that existed in the

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Pension Code before the amendments of Public Act 97-651 to purchase, if they so

choose, service credit during a leave of absence in the future to work for a local

union. If that benefit is part of the contractual relationship resulting from

membership in the public retirement system, it is protected by the pension clause

even if the participant had not yet exercised the option before the amendments of

the Act took effect. See Buddell, 118 Ill. 2d at 105-06 (under the pension clause, a

statute creating a new deadline for purchasing military service credit could not be

applied to a current participant who had not yet exercised the option to purchase

service credit by the time of the amendment).

¶ 28 The only real question presented by the State’s appeal, then, is whether the right

to earn service credit on a leave of absence from a public employer to work for a

local labor organization is a “benefit” within the meaning of the pension clause.

The State concedes that a statutory right to union service credit was created but

argues that the right is not one entitled to constitutional protection because the

framers of the constitution did not intend it to be entitled to such protection. In so

arguing, the State merely relies upon the general justification for a public pension

system, which is to reward past public service, to provide a form of compensation

for past public service, and to encourage continued public service.

¶ 29 We find nothing in the case law, in the text of the pension clause, or in the

constitutional debates on the clause that would support the State’s argument that

the particular benefit conferred here is not entitled to protection. Kanerva held that

the text of the pension clause places no limits on the kind of “benefit” that is

protected by the clause so long as the benefit is part of the contractual relationship

“derived from membership” in the retirement system. Kanerva, 2014 IL 115811,

¶¶ 41, 54. The participants at issue here are members of their retirement systems

entirely due to their government employment. Each plaintiff was either working in

his public job when the option to earn union service credit was added as a benefit or

started public employment and joined the retirement system after the benefit was

already in place. The benefit was clearly a “benefit” within the meaning of the

pension clause, and the State’s argument must therefore be rejected.

¶ 30 The State’s contention that the delegates and voters did not intend that the

benefit at issue would be protected by the pension clause is pure speculation and

appears to be manifestly inaccurate, as the right to earn service credit on a leave of

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absence working for a teacher labor organization was one of the retirement system

benefits in the Pension Code for many years prior to and at the time the Illinois

Constitution was debated by the drafters and then ratified by the voters (see Ill.

Rev. Stat. 1969, ch. 108½, ¶ 17-134), just like the right to purchase the past military

service credit involved in Buddell. Thus, it was the public policy of the State at the

time our constitution was adopted to grant a path to such service credit as a benefit

of participation in at least one of the public retirement systems. Similar to a

legislature that is presumed to act with knowledge of all prior legislation, the

drafters of the constitution are presumed to have acted with full knowledge of

existing statutory law and the public policy of this state. Kanerva, 2014 IL 115811,

¶ 41. If the drafters had intended to prevent any benefit related to service credit in

connection with work done for a labor organization while on a leave of absence,

they could have so specified, especially where union service credit was already part

of the existing pension statute to some extent. But they did not. Rather, the drafters

chose “expansive language” that broadly defines the range of benefits

encompassed.

¶ 31 Plaintiffs have offered a public policy rationale for the union-service benefit,

arguing that it encourages public employees who do go to work for their unions to

take a leave of absence rather than quitting their public jobs altogether, thereby

increasing the likelihood that they might return to their public employment.

Plaintiffs also maintain that the benefit furthers the State’s labor relations policies

by promoting experienced public employees familiar with public service contracts

and priorities to serve as management counterparts in collective bargaining. The

State, on the other hand, argues that the benefit in question actually encourages

public servants to discontinue active government employment.

¶ 32 We find that, regardless of the purpose of the benefit and the merits of the

suggested utility of the benefit, it was a matter for the legislature to decide. And, as

Kanerva noted, “[w]e may not rewrite the pension protection clause to include

restrictions and limitations that the drafters did not express and the citizens of

Illinois did not approve.” Id. Accordingly, we hold that the circuit court correctly

determined that Public Act 97-651 was unconstitutional to the extent that it

eliminated as a pension benefit for current participants the ability to earn union

service credit previously bestowed by the legislature.

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¶ 33 II. Calculation of “Highest Average Annual Salary”

¶ 34 We turn now to plaintiffs’ appeal and first address the issue of whether the

amendments of Public Act 97-651 purporting to “clarify” that only public salaries

may be used in calculating the “highest annual average salary” violate the pension

clause of our constitution. Plaintiff’s argument requires this court to construe a

number of provisions of the Pension Code.

¶ 35 We note at the outset that the primary goal in construing a statute is to ascertain

and give effect to the legislature’s intent, and the best indicator of that intent is the

language of the statute itself. Slepicka v. Illinois Department of Public Health, 2014

IL 116927, ¶ 14. But a court will not read language in isolation; it will consider it in

the context of the entire statute. Id. It is also proper to consider not only the

language of the statute but the reason for the law, the problem sought to be

remedied, the goals to be achieved, and the consequences of construing the statute

one way or another. Chicago Teachers Union, Local No. 1 v. Board of Education of

the City of Chicago, 2012 IL 112566, ¶ 15. Additionally, we must presume that the

legislature did not intend to produce absurd, inconvenient, or unjust results. Board

of Education of Springfield School District No. 186 v. Attorney General, 2017 IL

120343, ¶ 25.

¶ 36 A statute is ambiguous if it can fairly be understood by reasonably

well-informed persons in two or more different ways. People ex rel. Birkett v. City

of Chicago, 202 Ill. 2d 36, 46 (2002). Furthermore, whenever there is any question

as to the legislative intent and clarity of the language of a pension statute, it must be

liberally construed in favor of the rights of the pensioners. Kanerva, 2014 IL

115811, ¶ 36.

¶ 37 Before Public Act 97-651 was enacted, both the LABF and the MEABF

calculated pensions based on the participants’ “highest average annual salary for

any 4 consecutive years in the last 10 years of service.” 40 ILCS 5/8-138(g-1),

11-134(f-1) (West 2010); see also id. §§ 8-138(b), 11-134(a). As was the case with

some of the individual plaintiffs in this lawsuit, when a member took a leave of

absence to work for a local union and contributed to the Funds for union service

credit, they may have done so for years and ultimately retired while still on a leave

of absence. In such cases where the salaries earned by the member from the union

job were among his highest 4 consecutive years in the last 10 years of service, the

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LABF and MEABF used those salaries to calculate the “highest average annual

salary.” This was consistent with the provision enacted in 1991, requiring that the

contributions by the participant for union service credit while on leave of absence

be “based on his current salary with such labor organization.” Id. §§ 8-226(c),

11-215(c)(3). Thus, according to the LABF’s and the MEABF’s interpretations, the

salary base for contribution purposes and for pension-calculation purposes was the

same.

¶ 38 Public Act 97-651 eliminated this possibility of using a salary paid to the

member while on leave of absence to work for a union in calculating the “highest

average annual salary” for pension purposes. In that regard, the Act added a new

subsection (e) to both section 8-233 and section 11-217. These subsections now

provide as follows:

“This Article shall not be construed to authorize a salary paid by an entity other

than an employer, as defined in [section 8-110 or section 11-107], to be used to

calculate the highest average annual salary of a participant. This subsection (e)

is a declaration of existing law and shall not be construed as a new enactment.”

40 ILCS 5/8-233(e), 11-217(e) (West 2012).

“Employer,” as defined in sections 8-110 and 11-107 and referred to in subsection

(e) quoted above, is limited to large cities and certain public entities and boards and

does not include local labor organizations. See id. §§ 8-110, 11-107.

¶ 39 Public Act 97-651 also amended section 8-138(g-1) by clarifying the meaning

of highest average annual salary as shown in part in the italicized portion as

follows:

“For purpose of calculating this annuity, ‘final average salary’ means the

highest average annual salary for any 4 consecutive years in the last 10 years of

service. Nothwithstanding [sic] any provision of this subsection to the contrary,

the ‘final average salary’ for a participant that received credit under

subsection (c) of Section 8-226 means the highest average salary for any 4

consecutive years (or any 8 consecutive years if the employee first became a

participant on or after January 1, 2011) in the 10 years immediately prior to

the leave of absence, and adding to that highest average salary, the product of

(i) that highest average salary, (ii) the average percentage increase in the

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Consumer Price Index during each 12-month calendar year for the calendar

years during the participant’s leave of absence, and (iii) the length of the leave

of absence in years, provided that this shall not exceed the participant’s salary

at the local labor organization. For purposes of this Section, the Consumer

Price Index is the Consumer Price Index for All Urban Consumers for all items

published by the United States Department of Labor.” Pub. Act 97-651 (eff.

Jan. 5, 2012) (amending 40 ILCS 5/8-138(g-1)).

The legislature made a similar amendment to the LABF article. See 40 ILCS

5/11-134(f-1) (West 2012).

¶ 40 Plaintiffs argue that the above-quoted amendments changed the law by

eliminating the possibility of using salary paid to a member by a union to calculate

highest average annual salary. Plaintiffs maintain that the changes diminished their

preexisting retirement system benefits by limiting the salary base for their

pensions. They contend that the text of articles 8 and 11 of the Pension Code before

the amendments permitted a union salary to be used in the highest average salary

calculation and that, even if the Pension Code was ambiguous in this respect before

Public Act 97-651, the legislature could not simply declare their amendments to be

a “declaration of existing law” in order to clear up the ambiguity and circumvent

the protection of the pension clause.

¶ 41 In response, the State argues that the amendments of Public Act 97-651 did not

change the meaning of the Pension Code because it always unambiguously

required that the salary to be used for calculating the pension was to be the salary

attached to the government position in which the employee actually worked or

from which he was on leave of absence. To support its argument, the State relies

upon a link between the definitions of “salary,” “present employee,” and

“employer” under the Pension Code. The State first notes the definition of “salary”

in section 8-117 of the Pension Code, which states in relevant part:

“ ‘Salary’: Annual salary of an employee as follows:

***

(b) If appropriated, fixed or arranged on an annual basis, beginning July,

1957, the actual sum payable during the year if the employee worked the full

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normal working time in his position, at the rate of compensation, exclusive of

overtime and final vacation, appropriated or fixed as salary or wages for service

in the position.

(c) If appropriated, fixed or arranged on other than an annual basis,

beginning July 1, 1957, the applicable schedules specified in Sections 8-233

and 8-235 shall be used for conversion of the salary to an annual basis.”

(Emphasis added.) 40 ILCS 5/8-117 (West 2010).

The State further notes that the Pension Code at all times defined “present

employee” as “[a]ny employee of an employer” (id. § 8-114(a)) and the word

“employer” has always referred to certain government entities, such as the City or

the Chicago Board of Education. As did the circuit court, the State also believes the

statutory references to “appropriated” reinforce the notion that the salary for

purposes of the calculation was meant to be the one set by the public employer.

¶ 42 We find the Pension Code prior to the amendments to be ambiguous on the

question of whether the union salary while on leave of absence could be used as a

basis for calculating the pension and find the State’s argument to the contrary to be

unpersuasive. The State places great weight on the definitions of “salary,”

“employee,” and “employer” found in the Pension Code. But it must be kept in

mind that the Pension Code specifically provided that the salary base for pension

purposes was the “highest average annual salary for any consecutive 4 years in the

last 10 years of service.” (Emphasis added.) Id. § 8-138(g-1). Work done on a

union leave of absence is indisputably a “period of service.” Nothing in the statute

before the amendment specifically stated that a union salary paid to an employee

during his last 10 years of service could not be used in the calculation. We do not

deduce a legislative intent with the definition of “salary” in the Pension Code to

define a limited class of payers of a salary. Rather, the purpose of the definition

seems to be to provide directions about such matters as whether overtime could be

included in annual salary and how to convert an hourly wage to an annual salary.

¶ 43 The Pension Code’s definitions of “employee” and “employer” do not clear up

the ambiguity. All the parties to this lawsuit concede that an employee on leave of

absence from his public job retains his status at all times as an employee of his

public employer and continues to be a “participant” for pension purposes. 40 ILCS

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5/8-113(a) (West 2012). The question that was left unanswered was whether the

union salary could be used in the calculation.

¶ 44 We also do not find controlling the legislature’s use of the term “appropriated.”

While that term does suggest a governmental appropriation, the statute also uses the

terms “fixed or arranged,” which are placed in the disjunctive in section 8-117(b)

and could be read consistently with the setting of a salary by a private employer. At

any rate, we note that the meaning ascribed to a term defined in the Pension Code,

such as “salary,” can differ when “the context otherwise requires.” Id. §§ 8-102,

11-217(b). Here, the context requires otherwise. The legislative intent of the

above-noted definitions to set rules for calculating the amount of a salary rather

than to limit the class of payers of a salary is evident in that these provisions have

not been materially changed since the Pension Code was adopted in 1963. It was

not until 1987 that the legislature adopted union service credit in the LABF and

MEABF. In 1963, there was no service credit for any period of union service. The

only salaries the employees would have been earning or upon which they would

have been contributing to the pension fund were government salaries. Four years

after the 1987 amendment allowing union service credit, the legislature made

another amendment, this time to provide that an employee’s union service credit

contributions had to be “based on his current salary with such labor organization.”

40 ILCS 5/8-226(c)(1), (2), 11-215(c)(3)(A), (B) (West 2010). It seems more likely

than not that the legislature intended the salary base for contribution purposes to be

the same as for pension calculation purposes following the 1987 and 1991

amendments, but as noted above, we find the statute to be ambiguous on whether

the legislature intended the union salary to be used in the calculation. It seems that

if it had intended to exclude the union salary from the calculation of the pension

base but not for contribution purposes, it would have clearly stated so at the time of

the 1987 or 1991 amendments.

¶ 45 Moreover, it would arguably create an absurd result to interpret the statutory

scheme as it existed prior to Public Act 97-651 to exclude the union salary from the

calculation of the “highest average annual salary for any 4 consecutive years in the

last 10 years of service.” Id. §§ 8-138(g-1), 11-134(f-1); see also id. §§ 8-138(b),

11-134(a). If before the Act the highest average annual salary could not be

calculated using the union salary the participant was actually earning during his

leave of absence, a conflict with sections 8-138 and 11-134 would arise whenever a

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member retires while on a leave of absence lasting more than six years. In such

cases, members would not have 4 years of (or any) salaries paid by the public entity

in the last 10 years of service from which to calculate a pension. For some

members, such as two of the plaintiffs in this case, limiting the “salary” for the

highest annual salary calculation to a public salary would result in the absurd result

of their having no eligible salaries for calculating their pensions. In construing a

statute, we must presume that the legislature did not intend an absurd result. See

People v. Fort, 2017 IL 118966, ¶ 35.

¶ 46 Given the arguably absurd and unjust result of having no eligible salaries for

calculating the pension, Public Act 97-651 amended sections 8-138(g-1) and

11-134(f-1) to create a new method for calculating the highest average annual

salary only applicable to participants with union service credit. Instead of using

salaries from within the last 10 years of service as with every other LABF and

MEABF member, the statute postamendment now requires that the highest annual

average salary be based on salaries before the leave of absence, no matter how long

ago. The amendments then ameliorate the harshness of not including the union

salary in the calculation by now including an inflation adjustment.

¶ 47 In response to the argument that, under the pre-Public Act 97-651 version of the

law, there might be no salaries to calculate the highest average annual salary if the

union salary could not be used, the State contends that a hypothetical salary should

be used to make the calculation based on what the employee would have earned had

he continued in his public job. The State points to the relevant definition of “salary”

referring to “the actual sum payable during the year if the employee worked the full

normal working time in his position, at the rate of compensation, exclusive of

overtime and final vacation, appropriated or fixed as salary or wages for service in

the position.” 40 ILCS 5/8-117(b), 11-116(a) (West 2010). The State maintains

that, based on this language, the pensionable salary does not have to be tied to an

amount actually received or paid by the public employer.

¶ 48 Again, we find this language to be ambiguous. The “position” referred to in the

portion of the statute noted by the State could just as well refer to a participant’s

position with the union. And again, it also appears that with the use of the word “if”

and the phrase “normal working time in his position,” the legislature was concerned

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with giving directions for assessing the amount of the salary rather than who could

be a payer of a salary.

¶ 49 The State argues that, even if the statutory scheme with respect to whether a

union salary can be considered in the calculation is ambiguous, the legislature

properly clarified that it was always intended to mean the salary for the employee’s

position with the public employer. In support of its stance, the State cites general

case law for the proposition that an amendment may be applied retroactively if its

purpose is to clarify an existing law that is ambiguous.

¶ 50 There are a number of reasons why the State’s argument is faulty and cannot be

applied to the circumstances here. First, the legislative intent that controls the

construction of a public act is the intent of the legislature that passed that act, not

the intent of the legislature that amends the act many years later. O’Casek v.

Children’s Home, 229 Ill. 2d 421, 441-42 (2008). Here, we have already

determined that the language is ambiguous and the legislative intent unclear.

Second, because it was a pension statute that was found to be ambiguous, the rule

applies that, where there is any question as to legislative intent and the clarity of the

language, “it must be liberally construed in favor of the rights of the pensioner.”

Kanerva, 2014 IL 115811, ¶ 55. If the legislature had the power to “clarify” the

intent of an ambiguous pension statute against the rights of the participants, it

would essentially negate the protections of the pension clause and override the

proviso from Kanerva about the court’s duty to liberally construe pension statutes

in favor of the rights of the pensioners.

¶ 51 For the reasons noted, we hold that the ambiguous statutory framework prior to

the amendment of Public Act 97-651 must be construed as allowing the right to use

a union salary from a leave of absence under section 8-226(c) or 11-215(c)(3) to

calculate the highest average annual salary. The amendments effected by Public

Act 97-651 necessarily changed the law and thereby diminished plaintiffs’

retirement system benefits in violation of the pension-protection clause of the

Illinois Constitution. The circuit court therefore erred in granting the State’s motion

to dismiss the counts of plaintiffs’ complaint that raised this issue.

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¶ 52 III. Whether “Any Pension Plan” Includes

a Defined Contribution Plan

¶ 53 Plaintiffs next raise an issue of statutory construction unrelated to the two

constitutional issues resolved above. They argue that the circuit court erred in

denying their motion for summary judgment with respect to counts X and XII of

their complaint, which sought a declaration that the “any pension plan” language of

section 8-226(c)(3) of the Pension Code does not apply to defined contribution

plans. In that regard, section 8-226(c)(3) provides that an MEABF member may

receive service credit for time spent on a leave of absence working for a local labor

organization, provided “the participant does not receive credit in any pension plan

established by the local labor organization based on his employment by the

organization.” 40 ILCS 5/8-226(c)(3) (West 2012). Plaintiffs concede that the

phrase “receive credit in any pension plan” clearly applies to a defined benefit plan

established by a local labor organization, but they contend that the phrase was not

intended to include a defined contribution plan, such as a 401(k) plan. The

difference between the two kinds of plans is significant. Defined benefit plans, such

as the MEABF, provide a fixed, regular payment upon retirement determined by a

formula giving the participant credit for years of service and other factors such as

age and salary. See id. §§ 8-138, 8-226; Jones, 2016 IL 119618, ¶ 4 (“[T]he City

pension funds provide traditional defined benefit plans under which members

receive specified annuities upon retirement generally based upon the member’s

salary, years of service, and age at retirement.”); see also In re Marriage of

Blackston, 258 Ill. App. 3d 401, 402 (1994). By contrast, in a defined contribution

plan the participant is not entitled to any guaranteed, fixed, and regular payments

upon retirement. Instead the participant is entitled only to the accumulated value of

contributions at the time of any withdrawal. 40 ILCS 5/8-138, 8-226 (West 2012).

The way section 8-226(c)(3) is interpreted will have a significant impact for a few

of the plaintiffs in this case who are in jeopardy of losing significant amounts of

service credit in the Funds for having contributed to a defined contribution plan

through their union job while on a leave of absence from their government

employment.

¶ 54 Plaintiffs note that section 8-226(c)(3)’s prohibition only applies if the

participant “receives credit” in a pension plan. Plaintiffs claim that the statute is

referring to receiving service credit based on a period of employment. They

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maintain that this phraseology supports their construction because only in a defined

benefit plan does a participant receive credit for years of service toward a pension.

Bandak v. Eli Lily & Co. Retirement Plan, 587 F.3d 798, 801 (7th Cir. 2009).

Plaintiffs further argue that the purpose of the statute is fulfilled by barring receipt

of service credit in a defined benefit plan but that purpose does not require barring

members from accumulating retirement savings in some other way, such as a

401(k).

¶ 55 The Funds as defendants argue, on the other hand, that the term “any pension

plan” is clear and unambiguous. They point out the expansive nature of the

modifier “any” and rely on the circuit court’s conclusion that “pensions come in all

shapes and sizes, ranging from defined benefit to defined contribution to hybrid

plans in between.” Defendants also disagree with plaintiffs’ contention that the

phrase “receives credit” means credit for years of service based on employment.

According to defendants, “credit” simply means “the balance in an account,” and

thus the word is consistent with a defined contribution plan.

¶ 56 Whether section 8-226(c)(3) applies to defined contribution plans in addition to

defined benefit plans is a question of statutory interpretation. We again note that

our primary objective in construing a statute is to determine the intent of the

legislature, and the most reliable indicator of that intent is the plain and ordinary

meaning of the statute itself. The Pension Code does not define the phrase “pension

plan.” When a statute fails to define a term, it is entirely appropriate to look to the

dictionary to ascertain the meaning of the term. People v. Chapman, 2012 IL

111896, ¶ 24.

¶ 57 Black’s Law Dictionary defined “pension” (at the relevant time when the

statutory section at issue was enacted in 1987) as a “[r]etirement benefit paid

regularly (normally, monthly), with the amount of such based generally on length

of employment and amount of wages or salary of pensioner.” Black’s Law

Dictionary 1021 (5th ed. 1979). It also defined “pension plan” in relevant part as

“[a] plan established and maintained by an employer primarily to provide

systematically for the payment of definitely determinable benefits to his

employees, or their beneficiaries, over a period of years (usually for life) after

retirement. Retirement benefits are measured by, and based on, such factors as

years of service and compensation received by the employees.” Id.

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¶ 58 Plaintiffs argue that these dictionary definitions are consistent with what a

participant in the Funds would commonly understand a “pension plan” to be. A

person with only a 401(k) defined contribution plan, for example, would not likely

think of himself as having a “pension,” given that the amount to be received upon

retirement is not guaranteed and not “definitely determinable.” Nor is it based on

any factors such as years of service or salary. Instead, he would be much more

likely to think of himself as having a retirement savings plan. Only someone in a

defined benefit plan would be likely to think of himself as having a pension.

¶ 59 The defendant Funds also cite dictionary definitions for “pension” dating to the

time period when the statute was enacted. But those definitions actually support

plaintiffs’ argument that the legislature may have intended only defined benefit

plans, not defined contribution plans, when it used the phrase “any pension plan.”

For example, the Funds cite Webster’s New World Dictionary: Second Concise

Edition (1982), which defines “pension” as “a regular payment, not wages, to one

who has fulfilled certain requirements, as of service, age, disability, etc.” Similarly,

the Funds rely on an online version of a Merriam-Webster dictionary that defines

“pension” as “a fixed sum paid regularly to a person.” Merriam-Webster’s Online

Dictionary, http://www.merriam-webster.com/dictionary/pension (last visited

Nov. 8, 2018) [https://perma.cc/LPG8-9Z6F]. But these definitions speak of a

“fixed sum,” “paid regularly,” based on such factors as “service” and “age,” and

would thus be consistent with a traditional defined benefit plan but not a defined

contribution plan. A defined contribution plan guarantees only the value of the

contributions to the plan that survive the variables of market performance, and

there is no fixed, determinable, guaranteed amount based on service and age. See

In re Marriage of Blackston, 258 Ill. App. 3d at 402.

¶ 60 The only definition that solidly supports the Funds’ broad definition is found in

the federal Employee Retirement Income Security Act of 1974 (ERISA), which

defines a “pension plan” as follows:

“any plan, fund, or program, which was heretofore or is hereafter established or

maintained by an employer or by an employee organization ***

(i) [that] provides retirement income to employees, or

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(ii) results in a deferral of income by employees for periods extending to

the termination of covered employment or beyond,

regardless of the method of calculating contributions made to the plan, the

method of calculating the benefits under the plan or the method of distributing

benefits from the plan.” (Emphases added.) 29 U.S.C. § 1002(2)(A) (2012).

The Funds note that, because this definition of “pension plan” is so broad,

“virtually any contract that provides for some type of deferred compensation will

also establish a de facto pension plan” under ERISA. Modzelewski v. Resolution

Trust Corp., 14 F.3d 1374, 1377 (9th Cir. 1994). The Funds argue that “it is a

stretch” to think that the Illinois General Assembly was not aware of this ERISA

definition when it enacted the language of section 8-226(c)(3) of the Pension Code

in 1987 because the ERISA definition of “pension plan” was firmly in place by

then.

¶ 61 We note that the existence of alternate dictionary definitions of a word or

phrase, each making some sense under the statute, leads to the conclusion that the

term in question is ambiguous. Poris v. Lake Holiday Property Owners Ass’n, 2013

IL 113907, ¶ 50. Here, the broad definition of “pension” found in ERISA contrasts

with the more common understanding of “pension” found in the dictionary

definitions quoted above. The ERISA definition alone is obviously not controlling

of the outcome here where the Pension Code makes no reference to it. Moreover,

the purpose of the ERISA definition of “pension plan” seems to be to have a wide

sweep to protect the expected benefits of plan participants (see Sly v. P.R. Mallory

& Co., 712 F.2d 1209, 1211 (7th Cir. 1983)), while the purpose of section

8-226(c)(3) is to prohibit a member from receiving credit toward a pension for the

same period of time he is receiving credit in a pension of a local labor organization.

But absent from section 8-226(c)(3) is any obvious intent to prohibit an employee

from accumulating retirement savings in some other way, such as a defined

contribution plan account. Assuming that it would be a worthy public policy benefit

at all to allow a union leave of absence like the ones involved in this case, it would

seem that deterring such forms of retirement savings, especially where they might

not involve any employer contributions at all, would be an unlikely public policy.

¶ 62 The Funds focus on the word any in the “any pension plan” language of the

statute. But if a defined benefit plan is a pension plan and a defined contribution

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plan is not a pension plan under the commonly understood meaning of “pension

plan” in 1987 when the provision was enacted, then defendants’ argument must be

rejected. At any rate, to the extent that there are competing definitions of “pension”

or “pension plan,” some that would and some that would not include defined

contribution plans, it means only that the term as used in section 8-226(c)(3) “does

not have a single plain meaning but is ambiguous.” See Landis v. Marc Realty

L.L.C., 235 Ill. 2d 1, 11 (2009).

¶ 63 Because the term “pension plan” in section 8-226(c)(3) is ambiguous in this

respect, it must be liberally construed in favor of the rights of the pensioners so as

to apply to a defined benefit plan only and not to defined contribution plans. See

Kanerva, 2014 IL 115811, ¶ 55. Accordingly, we reverse the circuit court and hold

that the term “receive credit in any pension plan” as used in section 8-226(c)(3)

does not include defined contribution plans.

¶ 64 CONCLUSION

¶ 65 Our resolution of the foregoing issues renders it unnecessary to address the

alternative arguments raised by the parties in their briefs. For the foregoing reasons,

we affirm the circuit court’s judgment granting plaintiffs’ motion for summary

judgment and denying defendants’ cross motions for summary judgment on the

counts of plaintiffs’ complaint raising a pension-clause challenge to the elimination

of the right to earn service credit for a union leave of absence. We find that the

circuit court properly held that, with respect to participants who were already

members on the effective date of Public Act 97-651, the denial of the future ability

to earn service credit on leave of absence for labor organization employment

violated the pension clause of the Illinois Constitution. We reverse the circuit

court’s judgment dismissing the portions of plaintiffs’ complaint that alleged a

violation of the pension clause of the Illinois Constitution related to Public Act

97-651’s change in the law to deny the use of a union salary under section 8-226(c)

or 11-215(c)(3) to calculate the “highest average annual salary.” We also reverse

the circuit court’s rulings on the parties’ cross-motions for summary judgment that

resulted from the circuit court’s construction of section 8-226(c)(3) to include

defined contribution plans within the definition of “any pension plan.” We remand

the cause to the circuit court of Cook County for further proceedings consistent

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with this opinion.3

¶ 66 Circuit court judgments affirmed in part and reversed in part.

¶ 67 Cause remanded.

3

Our holding striking down the specific provisions of Public Act 97-651 mentioned in this case

of course applies only to the specific provisions discussed herein. The rest of the provisions of

Public Act 97-651 are subject to principles of severability, as section 1-105 of the Pension Code

specifically provides that “[t]he invalidity of any provision of this Code shall not affect the validity

of the remainder of this Code.” 40 ILCS 5/1-105 (West 2012). Similarly, section 98 of Public Act

97-651 provides that “[t]he provisions of this Act are severable under Section 1.31 of the Statute on

Statutes.” Pub. Act 97-651, § 98 (eff. Jan. 5, 2012). We therefore make no ruling here on other

provisions of Public Act 97-651, amending the Pension Code, that are not before us.

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