Pension loophole could mean $500,000 more for ex-Grayslake cop

A loophole in the state's police pension law could cost Grayslake taxpayers an extra $500,000 over the next 20 years that would benefit just a single former police sergeant.

A Lake County judge ruled in September that former Grayslake Police Sgt. Conrad Gutraj is entitled to not just one annual 3 percent cost-of-living pension increase, but two.

Judge Diane Winter's ruling states that Gutraj is entitled to one annual 3 percent bump to his pension for his disability and another because he turned 60 in 2011.

“It is evident that both of these sections (of the pension code) unequivocally provide for separate annual 3 percent increases ... therefore both benefits may be applied to a qualifying pension beneficiary,” Winter wrote.

The judge's ruling is being disputed, but if it's upheld Gutraj could see his pension increase by nearly $15,000 this year from 2011's $50,812 payout.

The ruling is based on a 2001 amendment to the state's pension law that allowed disabled former police officers 30 days to apply for additional benefits that increased pension payments each year. The disabled officers had to fall into a set of very narrow guidelines in order to qualify for the benefit. Many pension experts believe the law was created to assist a single injured officer. However, Gutraj and other disabled officers were able to qualify as well.

“The concept of anybody being eligible for more than one cost-of-living adjustment from the same pension fund is so foreign that nobody would have even anticipated that it was a possibility,” said Joe McCoy, legislative director for the Illinois Municipal League, a lobbying group for Illinois towns. “This is certainly an unintended consequence.”

Adding intrigue to the saga is the fact that Gutraj isn't just a former officer, but he's a longtime member of the Grayslake Police Pension Fund board who sat in on the board's private executive sessions when his case was discussed over the past year. It's a practice that isn't illegal, but certainly is considered questionable by legal experts.

“Normally you would recuse yourself because of the conflict and leave the room, but I don't know that you're required to,” said Terry Pastika, executive director of the Citizen Advocacy Center in Elmhurst. “It's obviously an adversarial environment.”

Gutraj's attorney, Jim Dobrovolny, argued that the board didn't have to go into executive session, but as a member of the board Gutraj is “entitled” to be part of all board meetings.

“He had a right to be there,” Dobrovolny said. “He abstained from voting.”

But Tim Elliott, a Wheaton attorney specializing in municipal law, believes Gutraj should have left the room.

“It's preposterous,” Elliott said. “It violates the tenet of any good government practice. By staying in the room, you're placing your own interests above those of the board's and the taxpayers.”

The five-member pension board is appealing Winter's decision. Officials from the pension board and Gutraj declined to comment on the case, citing the appeal process. However, Grayslake Mayor Rhett Taylor said the village — which is ultimately responsible for covering the additional costs associated with the ruling — is monitoring the case.

“In general, obviously everyone is very supportive of our first responders. Whether they are firefighters or police, they do put themselves at risk,” Taylor said. “One thing that people need to understand is that pension costs are borne by the taxpayers and as long as they continue to escalate, that has a direct impact on property taxes.”

Gutraj suffered a heart attack at age 49 while performing administrative tasks at the police department in April 2000, according to court records and minutes from Gutraj's pension hearing. Three doctors ruled him unfit to return to duty. The 25-year veteran of the department was awarded a “duty disability” pension of $38,204 in October 2000, which was 65 percent of his final annual salary.

Gutraj has never worked anywhere else again, which makes him eligible for his disability pension.

In February 2001, he qualified for a 3 percent non-compounded annual cost-of-living increase under the amended pension law and began receiving it. By the time he turned 60 in 2011, his annual pension amounted to $50,812, following the pension formula.

State law allows disabled retired police officers to receive a significant boost in their pensions the year after they turn 60. The law calls for them to receive a non-compounded 3 percent bump of their original disability pension for every year they were receiving the disability pension. In Gutraj's case, 3 percent of his original pension is $1,146 and he received it for 12 years, which amounts to a $13,754 boost.

But he argues that he is due a second increase based on reaching age 60, which would make his 2012 pension total $65,712.

The pension board — armed with an advisory opinion from the state's Department of Insurance — ruled in January he was ineligible because he had received that $13,754 already over the past 12 years.

“Based on the plain language of the statutes, it appears that the intention of the General Assembly was that a police officer not simultaneously receive the increases,” the Department of Insurance letter reads, noting the opinion was written for a similar case in 2008.

But Judge Winter disagreed with the department's legal stance, citing previous case law in her decision that read “the legislature knew exactly how to draft ... language that limited one pension benefit increase in lieu of another pension benefit increase when it intended to do so.”

If Winter's decision is upheld by the appellate court, it would mean Gutraj would receive an annual increase of $2,292 every year from now on and his 2012 pension would be $65,712 instead of $51,958. That would amount to $189,112 more in retirement benefits by his 70th birthday. By his 80th birthday, Gutraj would have collected $492,837 more than he would have without the judge's decision.

Dobrovolny said he has never “run the numbers” to determine what his client would be entitled to if the judge's decision is upheld.

“It's pointless unless there's a final determination,” Dobrovolny said. “I know he's not going to be any worse off than he is.”

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Contact Jake at jgriffin@dailyherald.com or (847) 427-4602. Follow him at facebook.com/jakegriffin.dailyherald and at twitter.com/DHJakeGriffin.

Pension booster

If a Lake County judge's ruling is upheld, Grayslake taxpayers will pay hundreds of thousands of dollars more than expected for a former police sergeant's pension.

<b>$38,204.40</b>: Former Grayslake Police Sgt. Conrad Gutraj's original disability pension awarded in 2000.

<b>$1,146.13</b>: 3 percent cost-of-living adjustment awarded each year since 2001.

<b>$51,957.98</b>: Gutraj's estimated 2012 pension if ruling is overturned.

<b>$65,711.57</b>: Gutraj's estimated 2012 pension if ruling is upheld.

<b>$189,111.78</b>: Additional pension payments at age 70 if ruling is upheld.

<b>$492,836.76</b>: Additional pension payments at age 80 if ruling is upheld.

Source: Daily Herald analysis