The State of Illinois and City of Chicago are both well known to have some level of financial distress. According to a recent news article (http://www.chicagotribune.com/news/local/breaking/ct-teacher-pension-payment-error-met-20160815-story.html), part of this issue could be due to mismanagement of funds in the various pension programs that the city and state sponsor.
The Chicago Teachers Pension Fund, which is one of the largest pension programs in the country, has reportedly been overpaying teachers out of the pension program. In recent years, the managers of the fund have reportedly overpaid retired teachers a total of $2.8 million. The overpayment was related to the misinterpretation by fund managers of laws that were enacted in 2012 that changed the way that the vesting dates of some former teachers were calculated.
In total, the school system and pension program believe that about 250 different retired teachers received benefits that they were not supposed to receive. The teachers that received the excess pension proceeds earn between $50,000 and $217,000 from pension income and the average teacher received about $12,000 in excess over the two year period.
At this point it is not yet determined how or when the pension program will be able to recoup the money that they lost. It is assumed that the teachers that received the pension income will be paying the money back over a certain period of time through either a lump sum payment or by received reduced benefits for several years. The issues that resulted in the overpayment have reportedly been fixed and cleared up by all parties involved and the city is also considering putting forth a more detailed plan of how to recoup overpayments should a situation such as this arise again.