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MEMO
To: Retirees/Annuitant Healthcare Participants From: Attorney Clint Krislov
Re: Initial report on the Dec. 12 hearing
Uncashed Premium Reconciliation Refund Checks: We have been under a confidentiality order on this until Dec. 11. Last June, we inadvertently learned that there were a number of reconciliation refund checks that had not been cashed.
We view these as unclaimed refunds, which, under the 2003 Settlement and 2008 Audit and Reconciliation Order, should have been recycled into reducing premiums for ongoing par- ticipants, rather than just kept by the City. The City’s attorneys refused to disclose the number and amounts, basically giving the City cash float on them. As a result of our pursuit, the court in September ordered them disclosed to us, but under a con- fidentiality order, so we could not disclose them. On Dec. 11, that order was lifted.
There were approximately 8,000 outstanding checks to- taling $837,715.01; an average of $100 per check, some ex- ceeding $1,400.00; some dating back to 2005 — meaning the City kept this secret for 13 years. The City says it has now written to last known addresses for the 6,000 people and be- lieves that some 2,000 are already deceased.
Beginning in mid-December, the City was supposed to put a button on its website so retirees and their families can search to see if there are uncashed checks for them, as well as a way to get them reissued.
The court has prohibited us from publishing the list on our website; so, in the meantime, you can call the benefits office at 877-299-5111 to see if you are on the list. The City’s Notice Ads should start running in the newspapers on or about Dec. 26, 2018.
The Unpaid Subsidies: We strongly pushed to get the stat- utory healthcare subsidies brought current in the January an- nuity payments. For police and fire, that would be a lump sum: $1,320 for non-Medicare, $504 for Medicare-qualified. And kept current thereafter: For police and Fire: $55 per month for non-Medicare, $21 for Medicare-qualified. For municipal and laborers: $25 monthly, regardless of Medicare status.
At first, Judge Cohen seemed inclined to wait until the City levies an amount to support the healthcare subsidy (which would take years). We eventually convinced him that the Funds are obligated to pay the subsidies, and they can’t just defer to the City. Additionally, we crafted and presented a spreadsheet showing that the total to bring the subsidies current (about $16.5 million) is a trivially small portion of the funds’ assets (police have more than $3 billion, fire has $1 billion, municipal has $4.55 billion, and laborers have $1.27 billion).
The judge actually seemed to pick up on this one and
pressed the funds on this. They squirmed but really could not refute their obligation, saying that they have a fiduciary duty not to pay anything for which they don’t have a dedicated revenue stream.
While the judge seems to share our view rejecting that de- fense, he wanted to give them a chance to weigh in on the ob- ligation and the amount. He has scheduled us for Jan. 16 on this issue. We pushed to have it done by year end, but judges seem to give everyone a lot of leeway around the holidays.
We are proposing that the funds just pay two thirds of that money out to annuitants (who should not have to wait any longer) and pay the rest into the court or hold, as fees, for producing the recovery.
(To correct some misstatements that we’ve heard, we’re asking for a one third fee from the “make current” lump sum. We would not claim anything from future annuity payments, just one third of the bring-current amount.)
And there is no certainty that we’re going to get any fees from this at all. The City’s lawyer felt the need to weigh in and inform the court that there is a question about whether any fees are obtainable in pension cases, either from the City or the recovery.
So, we know that the one thing that will unite the City and fund lawyers is fighting against our firm getting anything for this work, even from a recovery.
Our appeal to the Appellate Court seeking enforcement of the funds’ statutory obligation to provide a plan for their annuitants: We’re working on the brief to the appellate court asking to declare that the funds do have an obligation to provide a plan for their annuitants. This might be on file by year end.
So, we’re actually making some progress.
We hope to get your subsidies brought current in the Feb- ruary annuity payments. And we’re trying to get your entitled coverage back in place, maybe during 2019. But you cannot wait to sign up for coverage. Call your fund and make sure you’re signed up and covered under some healthcare plan for 2019. We’d also appreciate your contributions to the war chest. Email clint@krislovlaw.com.
When we receive the final version of the hearing transcript, we’ll post it at www.krislovlaw.com.
CHICAGO LODGE 7 ■ JANUARY 2019 11