An Alternative View of Our Pension and Union
September 2026 Newsletter
Every year our pension fund is required to provide you with a report summarizing your contributions to the fund. It is important that the membership understands these contributions in relation to the other revenue sources necessary to continue making more than $35 million in monthly payments to our retired members.
Where the Money Comes From
Years ago, the Fund sponsored a seminar explaining what caused our pension fund to be so severely underfunded. During that presentation, one of the Fund’s paid consultants provided graphs from the National Association of State Retirement Administrators. Similar data is published by organizations like CalPERS and NCPERS. Those graphs tell an important story: most of a public pension fund’s revenue does not come from member or employer contributions at all – it comes from investment earnings. Investment earnings are key to a stable, successful defined-benefit pension plan like ours, the Firemen’s Annuity and Benefit Fund (FABF).
As a trustee, I found this alarming because I knew we did not have enough assets to capitalize on investment earnings, the biggest source of revenue for our pension fund. If our Fund is going to continue making promised payments, it must be able to take advantage of the same investment opportunities that healthier funds enjoy. During my 20+ years on the Fire Department, I have seen a steady rise in equity markets that the FABF failed to capitalize on because we neglected to hold the City accountable for adequate funding. Because the City has allowed the funding ratio to remain so dangerously low, our asset base is too small to generate the investment returns necessary to close the gap—causing us to miss much on the greatest bull market in history. Furthermore, many financial analysts doubt that macroeconomic conditions going forward will support an investment environment like the one we have witnessed over the last two decades.
Your Contributions Should Stay in the Fund
What is most troubling to me is that the amount shown on your individual statement is not necessarily required to stay in the fund. That money was contributed by you, from your paycheck; it should not be used to pay benefits for someone else, even a fellow member of your union. The fiduciary duty the Retirement Board owes you is due to your membership in the FABF; the Retirement Board owes no fiduciary duty to you as a member of Local 2. No matter how much Local 2 wants to contribute to politicians who are willing to give us additional benefits without identifying adequate financial resources, the Retirement Board has no duty to Local 2 or its agenda. In fact, if the trustees of the FABF were abiding by their fiduciary duty they would need to ignore the agenda Local 2 has historically adopted.
A Proposal the Board Declined
The pension fund’s legal counsel has advised that nothing legally prevents the Fund from spending active members’ contributions to pay for retiree benefits each month. While utilizing active members’ contributions for retiree benefits may be legal, in my mind it is not ethical. An astute observer can’t help but see similarities to a Ponzi or pyramid scheme. As a trustee, I proposed a policy prohibiting the use of any active member contributions for retiree benefits. Instead, I proposed that the Board monitor the collective amount owed to all active members. Under my policy, if the market value of the pension fund’s investments fell below a threshold tied to what is owed to active members, the Retirement Board would notify the City that it must provide the necessary funds for upcoming monthly benefit payments, rather than continuing to liquidate assets meant for active members’ retirements. This policy would guarantee that contributions of active members remain in the Fund and earn investment income for their eventual retirement. I believe that is a prudent policy that respects all members and aligns with the fiduciary duty owed to them. Under the leadership of the current Board President, the Board chose not to pursue that proposal. I am not sure whether the current Board even monitors the collective balance of active members’ contributions any longer.
The Retirement Board has a fiduciary obligation to all members of the FABF; no class of membership takes priority. Fiduciary duty ignores age, sex, seniority, or rank. I contend that if the Retirement Board treated all members equally, the policy I proposed would have been adopted—or at least considered rather than ignored.
What the Independent Professionals Say
Finally, I believe the comment by the Retirement Board President in the Fall 2025 Report to Participants stating, “Our Fund’s financial health remains strong,” is blatantly dishonest. It is an insult to the membership to make that suggestion, especially considering that the President also wrote, in the same letter, that the Board had just reviewed and accepted the independent professional reports from the auditors and actuaries.
In that same actuarial report, the independent professionals state the following:
- “FABF is a severely underfunded plan. The funded ratio is only 23.7% using fair value of assets and the unfunded actuarial accrued liability is $5.71 billion as of December 31, 2024.” (p. 3)
- “…the funded ratio is projected to remain below 50% through 2042.” (p. 9)
- “The statutorily required amount systematically underfunds FABF.” (p. 32)
- “If contributions fall short of the statutory schedule included in Public Act 99-0506, the risk of insolvency increases substantially. If contributions fall significantly short of that schedule, insolvency is almost inevitable.” (p. 32)
The other trustees on the Retirement Board should not allow such misguided statements, unmoored from facts, to be disseminated to the members they serve. Please stay informed about the administration of the FABF; your biggest asset resides there. No one will look out for your interests better than you.
Captain Tim McPhillips
Former Trustee – Firemen’s Annuity and Benefit Fund
Past Newsletters
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Members of our pension fund may have read the recent Wall Street Journal (WSJ) Editorial - Chicago Pensions on the Brink: Some city funds can be considered ‘technically insolvent’. The Retirement Board, which administers our pension fund, responded with a letter to...
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