by Carolyn Welch Clifford (Fall 2016)
The Third District Appellate Court recently tackled a difficult factual scenario regarding a fire chief’s alleged return to service and its effect on his retirement benefits in Cronholm v. Board of Trustees of the Lockport Fire Protection District Firefighters’ Pension Fund, 2016 IL App (3d) 150122 (June 14, 2016). While the facts behind the case are not all that unusual for an Illinois fire department or fire protection district when either seeking to hire a fire chief from outside the fire department or retain a retiring fire chief in an administrative role, the split decision in this case raises new issues in Illinois regarding chief officers, pension membership, retirement benefits, and potential liability for the individual, the pension fund and the employer.
First, a history lesson
Before the Americans with Disabilities Act prompted changes in the Illinois Pension Code that removed medical evaluations for firefighter pension fund membership over two decades ago, fire chiefs hired from outside a fire department or fire protection district were routinely placed in the Illinois Municipal Retirement Fund (IMRF). Presumably this was to address a concern that the chief would be rejected for membership based solely on health concerns.
During those years, before the combined creditable service legislation was passed in 2004, many of these fire chiefs actually had no interest in participating in their new fire departments’ Article 4 pension fund, as they likely were already drawing a 20-year pension benefit with their prior department’s pension fund and were unlikely to work an additional ten years to draw a minimum retirement benefit from the second pension fund.
After the advent of combined creditable service in 2004, fire chiefs who had been placed in IMRF in lieu of Article 4 membership were provided a statutory mechanism to move their creditable service from IMRF to their fire departments’ Article 4 fund. However, there were also fire chiefs who were hired from outside a fire department or fire protection district who sought alternative retirement benefits packages through their employment contracts in lieu of Article 4 membership, such as payments to a 457 plan. The Illinois Department of Insurance (DOI) frowned on such arrangements, maintaining that Article 4 membership was mandatory for all full-time firefighters, including the fire chief. Note that there is considerable disagreement with the DOI’s opinion on this issue.
More recently, municipalities and fire protection districts that sought to retain fire chiefs who had already maximized their Article 4 retirement benefit and wished to retire would make arrangements to rehire the retired fire chief in a new administrative capacity. Sometimes in these cases, the municipality or fire district did not replace the fire chief but rather shifted some of the traditional emergency response responsibilities to a deputy chief and retained the administrative work with the retired chief in his or her new capacity.
The advent of the “administrative chief” coincided with the significant growth in the size of many fire departments and fire protection districts in the Chicago suburban area, coupled with the increased responsibilities and complexity of running larger municipal fire service entities.
With this most recent permutation of the retire/rehire scenario, pension funds have been faced with new challenges in determining whether the return to work constitutes a “return to service” requiring suspension of Article 4 pension benefits. And it is at this point the facts of the Cronholm case begin.
The Facts behind Cronholm
Chief Robert Cronholm retired from the Lockport Township Fire Protection District on October 31, 2009. The Board of Trustees of the District hired the retired chief in a newly created “chief administrator” position on November 1, 2009, but did not hire a new fire chief. The pension board sought an advisory opinion from the DOI to determine whether the retired chief’s work as the District’s chief administrator constituted a reentry into active service under Section 4-117 of the Illinois Pension Code (40 ILCS 5/4-117) which would require a suspension of his retirement benefits.
The DOI opined in its advisory opinion that “fire chief” and “chief administrator” were substantially the same position and would qualify as a reentry into active service. In its opinion letter, the DOI stated that the “work of controlling and extinguishing fires at the location of any such fires” in Section 4-106(a) of the Code (which defines who is a “firefighter” for pension membership purposes) did not require the individual to literally “go to the site of the fire and begin working to extinguish the fire.”
As a result of the DOI’s advisory opinion, the District revised the job description and retitled the position as “administrator,” with a plan to hire a new fire chief in March of 2010. The DOI reviewed the new job description and concluded in a second advisory opinion that the new position as administrator would not qualify as reentry into service. The District’s deputy chief was promoted to fire chief thereafter in March 2010.
However, in May of 2010, District firefighters (in their capacity as members of the Fund) filed a declaratory judgment action against the pension board, alleging that it had breached its fiduciary duties by determining the retired fire chief had not reentered active service and by allowing him to retain his retirement benefit while he worked as the administrator for the District. In an unreported decision, the appellate court reversed a circuit court decision, dismissing the action.
“For those fire departments and fire protection districts that have sought to hire chief officers and administrative personnel while avoiding Article 4 membership, the decision opens a path to such hires.”
Because there was no “final administrative decision” issued by the pension board, the appellate court remanded it back to the pension board to conduct a hearing and issue a written decision regarding whether the retired chief had reentered active service (Randich v. Lockport Township Firefighters’ Pension Board, 2012 IL App (3d) 120032-U).
After conducting a hearing, the pension board determined Cronholm had reentered active service from the date he began working as the District’s chief administrator (November 1, 2009) until the District reorganized the structure of his position to administrator and promoted the deputy fire chief to fire chief (March 18, 2010). The pension board concluded that during the 4 1/2-month period, the retired chief’s responsibilities remained the same, except for on-scene fire suppression. As a result, the pension board determined that his retirement benefits should have been suspended during that timeframe and ordered that the $17,693.68 in benefits be repaid through $1000 deductions from his current benefit.
Thereafter, Cronholm filed the current action against the pension board, seeking review of the pension board’s decision, and the circuit court reversed that decision. The appellate court affirmed the circuit court’s decision, finding that the retired chief did not reenter active service upon becoming the District’s chief administrator in November of 2009. The court’s determination turned on the definition of “firefighter” found in Section 4-106(a) of the Code, which states:
[A]ny person employed in the municipality’s fire service as a firefighter, fire engineer, marine engineer, fire pilot, bomb technician or scuba diver; and in any of these positions where such person’s duties also include those of a firefighter as classified by the Civil Service Commission of that city, and whose duty is to participate in the work of controlling and extinguishing fires at the location of any such fires. [emphasis added] (40 ILCS 5/4-106(a))
In rejecting the DOI’s advisory opinion that allowed participation by an individual whose duties did not literally include extinguishing fires, the court found persuasive legislative history on amendments to Section 4-106 in 1977, in which a senator noted the intention was to “prevent abuse of the Downstate Firemen’s Pension Fund by defining what positions qualify as firemen” and “restrict membership in the fund to just those certified positions.” Noting this legislative history, the court stated:
The transcripts from the debate in the legislature make it clear that the intent of the legislation was to limit participation in the pension system to only firefighters, not to the myriad of other personnel who, although integral to the success of the fire department, are not firefighters. [emphasis in original]
Dissent by Justice Schmidt
It is in Justice Schmidt’s dissent where it is clear that the court’s majority opinion raises a myriad of new issues. As Justice Schmidt stated in the opening paragraph of his dissent:
This dispute is really about whether we should allow a fire chief to keep his job while drawing a firefighters’ pension by rewriting his contract to eliminate a “duty” that he most likely rarely or never performed. There is an obvious conflict between the definition of firefighter under section 4-106(a) of the Pension Code and scores of firefighters previously classified as such that do not engage in on-site fire suppression for a variety of legitimate reasons.
Justice Schmidt agreed with the DOI that removal of direct on-site fire suppression responsibilities from the position of chief administrator “is not dispositive” in determining whether the retired fire chief returned to active service as chief administrator. As Justice Schmidt noted, “municipalities are looking for ways to save money.” He surmised that the District essentially sought to keep its own fire chief at a reduced salary while transferring some of the obligation to pay the chief’s salary to the pension fund in the form of retirement benefits.
Justice Schmidt concluded:
The end-around violates the spirit of the Act [Illinois Pension Code] and will undoubtedly, if allowed, lead to further abuses of firefighters’ pension funds. Chief Administrator Cronholm was no less of a firefighter than one who is on desk duty with a medical restriction that prevents him/her from on-scene fire suppression; he was no less fire chief than he was the day before he retired . . . The majority and Cronholm’s statutory definition of firefighter wrongfully eliminates countless pensioners from the current section 4-106 pension system. We have a duty to avoid interpreting statutes in a manner that creates absurd results.
Opening Pandora’s new box
As the dissent concluded, the majority’s opinion suggests that membership in an Article 4 pension fund is strictly limited to “firefighters, whose duty is to participate in the work of controlling and extinguishing fires at the location of any such fires,” and does not include the “myriad of other personnel who, although integral to the success of the fire department, are not firefighters.” Under the court’s new duty test, several legitimate questions are raised:
- Are individuals currently actively serving in fire departments and fire protection districts under job descriptions that do not include the participation in the work of controlling and extinguishing fires at the location of any such fires ineligible to continue earning creditable service in the fund?
- Should job descriptions for all individuals working in ranks and positions within a fire department or fire protection district now specifically state that one of their duties is to participate in the control and extinguishment of fires at the location of any such fires?
- Are accommodations for individuals who are no longer able to participate in the control and extinguishment of fires at the location of any such fires (essentially, permanent light duty) no longer an option for purposes of keeping an individual in an Article 4 covered position?
- Should administrative personnel (such as chief officers, fire prevention bureau staff, etc.) who no longer have any role in the control and extinguishment of fires at the location of such fires be placed in the Illinois Municipal Retirement Fund (IMRF) – and will IMRF accept their membership?
These questions may be initially answered through DOI advisory opinions, but more likely will be addressed through statutory change. The majority of the court concluded that the retired chief’s administrative role did not constitute reentry. For those fire departments and fire protection districts that have sought to hire chief officers and administrative personnel while avoiding Article 4 membership, the decision opens a path to such hires.
However, while many fire chiefs do not often perform the majority of their duties at locations of fire, they do respond to calls and often participate in the control and extinguishment activities through incident command. It is important that their job descriptions reflect participation in the work of controlling and extinguishing fires at the location of any such fires. The same is true for fire service personnel working in similar “administrative” capacities, such as the fire prevention bureau: it is important that their job descriptions reflect this duty, unless it is the specific determination of the municipality that these administrative roles are “civilian” and not subject to Article 4 participation.
For those pension funds that have struggled with who should be a contributing member of the fund and how rehiring retired members should be addressed, there are now more questions than ever as to their fiduciary responsibility in scrutinizing the actual job duties of its members. And these questions further spill over into issues regarding who is — and who is not — disabled when permanent light duty is offered, now that the definition of firefighter has been narrowed. Until there is clear legal guidance, individuals serving in the fire service should be cautious in pursuing employment opportunities where the pension implications are unsettled.