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The Lesson in the Chicago Tribune ESOP Mess

"The Tribune case reflects the fact that making use of that stock for transactional purposes can well end up, in at least the outlier cases, with large losses to plan participants, after which the class action bar or the [DOL] are likely to try to transfer those losses to one or more of the parties involved in the transaction."  MORE >>

ESOPS Likely to Suffer First in Tribune Bankruptcy

Excerpt: Chicago is NOT the place to be these days - especially if you are a corrupt politician or a financially-stressed newspaper. On the newspaper side of things - Elizabeth Dale (Florida) writes to tell us that the ESOP angle of the The Tribune Company bankruptcy is truly a mess. She points us to this story from the New York Times Deal Book[.]  MORE >>

City Demands Thousands of Chicago Police Officers Pay Off Pension Error

"[A]pproximately 3,000 [Chicago police officers ] are required to cut a check to their pension fund, plus interest.... As part of the new contract for Chicago police officers approved by the City Council in late 2023, union members received a 2.5% base salary increase that applied retroactively to the start of 2022. 'The city did not withhold the correct 9% of members' salary and duty availability pay for the required payment,' according to a post on the fund's website.'

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Dramatic Rise in Debt for Chicago-Area Pension Plans

"The debt from 10 Chicago-area pension plans swelled more than 600 percent to $27.4 billion between 2001 and 2010, according to a study released Monday by the nonpartisan Civic Federation. That's $8,993 for each man, woman and child in Chicago, according to the report. The shortfall comes on top of more than $83 billion in unfunded pension liabilities at the state level, driving the cost up to nearly $15,000 per Chicagoan, the report shows."  MORE >>

Court Strikes Down Attempt to Modify Benefits Under Chicago Park District Pension Plan

"Circuit Court Judge Neil Cohen ruled that a January 2014 state change to the district's pension system was unconstitutional because it diminished benefits by raising the retirement eligibility age and reducing both cost-of-living increases and disability benefits."  MORE >>

Officials Investigate Breach of Chicago City Employee Retirement Accounts

"Workers with Nationwide Retirement Solutions noticed 'suspicious activity' with some 457 deferred compensation accounts for municipal employees ... on June 1 ... These accounts are administered by Nationwide on behalf of the city ... City officials said 91 accounts were breached, of which 58 accounts had money withdrawn and the remaining 33 accounts did not."  MORE >>

Chicago Borrows $220 Million for Pension Payments

"The city drew the money down from its $900 million line of short-term credit, which is akin to putting the tab on a credit card. The loan carries an interest rate of about 3 percent.... [T]he city is required to find the money to make the police and fire pension contributions, which increased dramatically this year, to start closing a combined $12.2 billion shortfall in the two pension funds."  MORE >>

Chicago Public Schools Spend $500 Million They Don't Have

"The preliminary budgets distributed to school principals for the coming school year assume state lawmakers will free CPS from having to make $500 million of a $700 million pension payment due June 30, 2016, either by giving the district more money or by allowing CPS to delay the payment until 2017 or later. CPS had tried to persuade the Chicago Teachers' Pension Fund to agree to an extension until 2017. The pension fund rejected the idea Friday."  MORE >>

Chicago Pension Tab: $18,596 for Every Man, Woman, Child

"That per-person figure is the highest among the nation's 25 largest cities. It's nearly double that of New York, the city with the second-largest tab. And it's more than five times the median for locales[.]"  MORE >>

$1.5 Billion a Year Cost to Fix Chicago Pensions?

"Absent significant pension system reforms, it would cost the city [of Chicago] an extra $1.5 billion a year beginning in 2016 to start the process of restoring financial health to its pension funds, aldermen were warned Monday. If those costs kicked in, services would be cut, taxes would soar or both. Continuing to rely solely on property taxes to cover pension costs would result in a tripling of the city levy[.]"  MORE >>

How Chicago Government Unions Rip Off the Taxpayer

How did [Chicago end up paying a union leader] a pension nearly three times his salary? That's where things get interesting. Few labor leaders took city pensions, the Tribune reports, 'until the law was changed in 1991 to base those workers' city pensions on their union salaries instead of their old city paychecks, dramatically boosting the amount they could receive'--a provision that 'became law with no public debate among state legislators and, more importantly, no cost analysis.'

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Tribune Bankruptcy Filing Exposes Risks of ESOPs

Excerpt: Retirement savings of Tribune Co. employees appear to have emerged largely unscathed after the media company's Chapter 11 bankruptcy filing Monday. But the filing highlights the risks of plans that invest employee savings into company stock. One big potential exposure came via the employee stock ownership plan, or ESOP, which the company set up in 2007. Under the ESOP, Tribune was planning to contribute shares -- worth about 5% of each employee's pay -- into employee accounts each year. The first contribution was expected to be made in the first quarter, and it isn't clear whether this will happen or whether the shares will have any value after Tribune's bankruptcy filing. At this point, the employees technically haven't lost anything in the ESOP because their balances are still zero.

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Nexstar Media Group Purchases Annuity for Tribune Plan

"Nexstar Media Group ... purchased a group annuity contract ... to transfer $117 million in assets ... [and] the benefit-paying responsibility of certain plan participants in [one of its Tribune Media plans] to the undisclosed insurer[.]"  MORE >>

U.S. Labor Department Concludes Settlement Restoring $32 Million to Tribune Co. Employee Stock Ownership Plan

[I]nsurance carriers have completed funding of a global settlement in the amount of $32 million to be allocated among the Tribune Employee Stock Ownership Plan's participants, and to pay for legal and administrative expenses.... The department [had] claimed that the company failed to act prudently and in participants' best interests when it engaged in the ESOP transaction. Additionally, the department [had] claimed that the ESOP transaction was prohibited, a claim consistent with the findings of the district court in the private plaintiffs' action.

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Judge Approves Class in Tribune ESOP Suit

The suit against the trustee of the Tribune Co. Employee Stock Ownership Plan during the company's takeover by billionaire Sam Zell has been certified a class action.

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Tribune ESOP Fiduciary Breach Suit Moves Forward

Excerpt: A federal court has moved forward claims that fiduciaries for the Tribune Company Employee Stock Ownership Plan (ESOP) breached their duty to the plan when real estate investor Sam Zell took the company private in an $8.3 billion stock buyback two years ago.

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The Tribune Bankruptcy and Breach of Fiduciary Duty Litigation over Its ESOP

Excerpt: [N]ot too long ago and in a very prescient move, a number of participants in the Tribune's ESOP filed a breach of fiduciary duty suit related to Sam Zell's use of the ESOP stock in the transaction by which Zell or entities he controlled acquired the Tribune; we now are learning that this apparently deeply flawed transaction ... placed the ESOP plan participants' holdings at greater risk than the assets of others involved in funding the transaction, including Zell himself. Targeting the fiduciaries for possibly having allowed the ESOP assets to be used in a more risky way than others were willing to do with their own investments sure smells like a pretty credible theory to me.

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What Will Happen to the ESOP in the Tribune Bankruptcy?

NCEO Executive Director Corey Rosen discusses the fate of the Tribune Company's ESOP and places it in context.

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An ESOP for the Tribune Company? Things to Know in Assessing the Transaction

NCEO Executive Director Corey Rosen analyses the proposal by Sam Zell to use an employee stock ownership plan (ESOP) to purchase the Tribune Company.

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Chicago's Pension Patch Job?

"In Chicago, powerful public unions are going head to head with a powerful and unpopular mayor who got rebuffed by Illinois's Supreme Court when he tried cutting pension benefits. Now, they are tinkering around the edges, increasing the contribution rate for new employees of the city's smallest pension, which is not going to make a significant impact on what is truly ailing Chicago and Illinois's public pensions. All these measures are like putting a band-aid over a metastasized tumor."

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