June 9, 2006
TO:      ANNUITANTS ENROLLED IN THE CITY OF CHICAGO ANNUITANT HEALTH CARE PLAN
Dear Retired and Widowed Participants
Over the past few months you probably have read newspaper articles and newsletters addressing premium payments made by annuitants in the City of Chicago Annuity Health Care Program “The Health Care Program”.

  In 2003 the Court approved, following a FAIRNESS HEARING, a settlement in the long standing lawsuit, City of Chicago vs. Korshak, et al.  In substance the settlement agreement provided 1) a health care plan for City Annuitants through June 30, 2013 and 2) the costs of the annuitant healthcare plan was to be shared by the City, the annuitants and by a fund subsidy.
This correspondence is intended to address those issues which relate to health care premiums paid by annuitants during the period September, 2003 through December, 2004 and thereafter.
The insurance coverage provided and the premiums to be charged to annuitants, as provided for by the settlement agreement, were based on actuarial “estimates and projections” made by an independent actuarial firm.  It is now apparent that the actuarial estimates and projections resulted in an over payment of premiums by certain categories of annuitants. The City has acknowledged this over payment.
A preliminary audit has confirmed that certain categories of annuitants are entitled to a refund. However, 1) an annuitant with single non-medicare coverage or 2) a married annuitant with both the annuitant and spouse in non-medicare status are not eligible for a refund, as no overpayments in these categories were made.
As to the current status of this matter, please be informed as follows:
1.         The City has acknowledged that there has been an over payment of the premiums to fund The Health Care Program and that certain categories of annuitants are entitled to receive a refund for the period September 2003 through December 2004.  
2.         This Fund and the other City Funds, have retained an independent firm to audit the City’s current analysis which reflects that all city retirement fund annuitants over paid approximately $14.7 million dollars in premiums during the period September, 2003 through December, 2004.  The Funds will require that further audit for the year 2005 and subsequent years be required and made in a more timely manner.
3.         The City has agreed to issue refunds to annuitants entitled to the same with interest paid on any such amount for the period through 2004.  This refund payment is to be made available within the next 30 to 45 days.  The payment will be without prejudice to any additional funds found owing after the audit, any such funds may require an additional refund from the City or a credit.
4.          After a preliminary audit revealed two categories of coverage, single medicare and annuitant and spouse non-medicare classes are not entitled to a refund payment as no overpayment for these categories of coverage was made. The Funds have insisted, and the City has agreed, to waive any attempt to recapture any over payment on the part of the City from those annuitants
5.        For the year 2005, and thereafter, the Funds are in the process of negotiating a procedure which will provide for a more prompt reconciliation of the actual costs and premiums paid. The Funds recognize that annuitants, on a fixed income, would appreciate a lower premium now as opposed to receiving a possible refund years later.

This Fund believes that the City should have more promptly addressed this issue and advised the various Funds of this matter on a more timely basis.  At the same time, this Fund believes the City, now aware of the over payments, has acted in the best interest of all City annuitants in attempts to correct the matter and to provide a mechanism to avoid future problems.
The Fund trusts this letter will answer all of your questions, and the Fund will keep you advised when further information is available.   As always, please feel free to contact the Fund, which is here to serve its participants.

Very truly yours,
John J. Gallagher, Jr.
Executive Director

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