Thousands of Chicago police officers have been hit with an unexpected setback as they received a letter from their pension fund this week, informing them of a payment shortfall due to a payroll error stemming from their latest contract. Approximately 3,000 officers are required to cut a check, including interest, to their pension fund.

The Fraternal Order of Police, Lodge 7, which represents the majority of rank-and-file officers, has announced plans to file a grievance in response to the error. They aim to shift the burden of the interest charge onto the city instead of the workers. The mistake has particularly affected Tier 2 members of the Policemen's Annuity and Benefit Fund of Chicago, who started working for the Chicago Police Department (CPD) on or after January 1, 2011. These members make up about half of the over 12,000 active members of the fund.

In a letter addressed to members, Kevin Reichart, the Executive Director of the Policemen's Annuity and Benefit Fund, attributed the error to a "fiscal year discrepancy" with the city. He explained that the retroactive salary contract payment received by officers on January 1, 2022, was counted by the city towards their 2022 annual salary cap, resulting in the payment shortfall.

Under the new contract for Chicago police officers approved by the City Council in late 2023, union members received a 2.5% base salary increase retroactive to the start of 2022. However, the city failed to withhold the correct 9% of members' salary and duty availability pay for the required payment, as stated by the fund's website.

According to state law, the fund must receive the required contributions, along with 3% interest. Members are requested to acknowledge the letter and make the necessary payment by August 31. Failure to do so will result in the original amount, plus interest, being withheld from their annuity payments upon retirement.

The Fraternal Order of Police has expressed its dissatisfaction with the situation, with President John Catanzara declaring that the union will file a class-action grievance to demand that the city covers the 3% interest charge imposed by the pension fund. Catanzara also argued that since the officers already paid state and federal income tax on these earnings, the city should refund the equivalent amount of taxes charged on that income.

The payment amounts vary, with some members facing a charge as low as approximately $80, while others could face amounts as high as $1,300. Catanzara acknowledged the frustration and placed blame on the CPD's Finance Department for their alleged "incompetence." He also criticized the pension fund for not bringing the issue to the attention of its members earlier.

The Policemen's Annuity and Benefit Fund of Chicago stands among the city's lowest-funded pension funds, with assets covering just 21.76% of its obligations through the end of 2022. The ongoing issue has further highlighted concerns surrounding the financial stability of the fund.

As the controversy surrounding the payment shortfall continues, the Chicago police officers affected are left grappling with the unexpected burden placed upon them by the pension fund's error, while the union seeks resolution and accountability from the city.