History of the Police Pension Fund
The Fund came into being in the year 1922 by virtue of an Act of the Illinois legislature. The Fund was created by the State
of Illinois for the expressed purpose of providing retirement, survivors and disability benefits to the City of Chicago
The Pension Code to which this Fund is subject applies to employees in cities of more than 500,000 inhabitants, which means that at the present time, it is applicable only to the City of Chicago.
The Fund is administered in accordance with Chapter 40 ILCS 5/5 101 et. sq. and The Fund’s powers, duties and responsibility are derived from the statutory language thereof. [Pension Code]
A Board of Trustees, called the Retirement Board administers the Fund. The Board consists of four (4) mayoral appointees
and four (4) elected trustees. The elected trustees each represent a class rank of police officer, sergeant, lieutenant
and above and a retired member representative.
The Board appoints an Executive Director who is charged with ensuring that all Board decisions and policies are implemented and properly executed. The Board also approves of all hirings requested by the Executive Director.
The Board elects one of its own members as President, one as Vice President, and one as Recording Secretary, and is by law required to hold regular meetings each month. The Board, among its many other duties, is required by law to:
(a) consider and pass upon all applications for annuity and benefits;
(b) invest the monies of the Fund pursuant to statutory regulations;
(c) make rules and regulations for the proper conduct of the affairs of the Fund;
(d) have an audit of the accounts of the Fund made at least once each year by a certified public accountant; and
(e) submit a detailed report of the affairs of the Fund to the State and to the City Council of Chicago each year.
The Fund covers and includes the following persons:
(a) An employee in the regularly constituted police department of a city appointed and sworn or designated by law as a peace officer with the title of policeman, policewoman, chief surgeon, police surgeon, police dog catcher, police kennelman, police matron, and members of the police force of the police department; and
(b) An employee as defined in sub-paragraph (a) immediately above who serving in the regularly constituted police department of a city in a rank or position which is exempt from career service and who, immediately prior to the time he began such service, was a participant in the Fund; and
(c) Any policeman of a park district transferred to the employment of a city under the ‘Exchange of Functions Act of 1957’.
The masculine gender whenever used herein includes the feminine gender and all annuities and benefits applicable to male policemen and their survivors and the contributions to be made for widows’ annuities or other benefits, shall apply with equal force to female policemen and their survivors without any modification or distinction whatsoever. (Sec. 40 ILCS 5/5-109.1)
The salary levels of policemen of that era are not available. It is recorded, however, that the first paid employee
of the Pension Board was a clerk whose salary was $100.00 a year, payable quarterly.
At its first meeting on July 26, 1887, the Board elected A.H. Burley President and D.W. Nickerson Secretary.
At its meeting of July 10, 1888, Mr. Nickerson in his first annual report to the Trustees showed total receipts for the year to be $30,253.18 and expenditures to be $21,388.77. This left a balance of $8,864.41.
At its meeting of January 9, 1900, the clerk reported receipts of $306,206.12; expenditures of $199,988.02, and a balance of $106,218.10 for the year ending December 31, 1899. During this year, a common pension granted to patrolmen who qualified for one-half pay was $41.66 per month.
Over the years, the laws governing the Pension Fund were changed many times. Then in 1921, a law was passed which re-codified and restructured the entire pension system. Under this law, which became effective on January 1, 1922, the Police Pension system of Chicago was put on an actuarial reserve basis. This change was a radical one which required much larger contributions of money from both policemen and taxpayers.
The theory of this law is that police officers shall receive such annuities as the accumulations to their credit for annuity purposes at date of retirement will purchase as of their attained ages; likewise that the widows of policemen shall receive such annuities as the accumulations of policemen for widow's annuities at the time of death, will provide. This theory was applied in the main to "future entrants;' i.e., police officers who entered service after January 1, 1922. "Present employee;' i.e., persons who entered service prior to January 1,1922, were not funded in this fashion but did receive similar benefits.
At December 31, 1921, the beginning of the modern era, the number of persons men, women, and children - on the pension roll was 1,980, and the total amount of their benefits was $113,903.88.
From the time of the restructuring of the Fund in 1922, the Fund grew steadily. In the early days, investments were limited to obligation of the United States Government and Illinois municipals (tax exempt). In 1961, the Illinois General Assembly passed into law an amendment permitting the Police Pension Board to place 20% of the assets in corporate bonds. In 1963, this restriction was increased to 33%, and later the restriction was removed altogether. During the 1960s the Fund added greatly to its holdings of Corporate Bonds and Public Utilities Bonds which carried substantially higher rates of return than tax exempt bonds or Treasury instruments.
During this time, retiring policemen did not enjoy the fullness of the pension formula until reaching age 57 with at least 20 years service. Upon fulfilling these two requirements, a policeman could obtain an annuity equal to 2 % for each year of service of average salary base up to a maximum of 75%. During the 1970s and 1980s these requirements were reduced to 53 years of age and 23 years of service; then to 52 and 22, 51 and 21, and finally 50 and 20.
In 1972 the General Assembly passed into law an amendment permitting the Fund to place 10% of the assets in common stock. This restriction was raised to 40% in 1983.
In 1983, the Trustees of the Retirement Board embarked on a far-reaching program to completely revise the investment process. Until that year, the Board had one investment advisor, a company which had only limited investment authority until late in its relationship with the Retirement Board.
Early in that year the Board decided to go to a multiple manager set, and for that purpose they interviewed and selected Ennis Knupp & Gold to be their financial consultant and to supervise and conduct the money manager search.
The Board heard many presentations from money manager candidates throughout the year, and in the end hired eight which were judged to be superior performers and to have the right mix of styles for the Fund.
The Pension Fund now employs over 40 investment managers in all sectors of the financial markets. These include equity managers, fixed income managers, index managers for both equity and fixed income, venture capital managers and Real Estate managers. The portfolio has been restructed in such fashions that the risk characteristics are low while the relative rate of return potential is high. The Trustees are confident the Fund will do well in all kinds of financial weather.
CHICAGO'S FINEST ------ THEN AND NOW
Mounted policeman in 1926
Note the cavalry breeches and boots
An officer ready to go
on patrol, about 1905.
Retired officer sits for
review with current officers