How would you like to get a 25 percent annual return on your retirement investment?
It's a great deal, and it's not available to regular folks. But it is -- legally -- available to union officials who started their careers working for the City of Chicago.
Take Tim Foley, who's the head of International Brotherhood of Electrical Workers (IBEW) Local 134. Under a little-known provision of the state pension code, union officials like Foley who worked for a brief time as City of Chicago employees are entitled to purchase credits in the city's pension fund equal to their service time and salary at the union.
So in 2008, Foley paid $347,000 out of his own pocket to purchase pension credits from the City. That's a lot of money, but by doing so, Foley ballooned his pension from just a little over $20,000/year to $105,000/year.
That increase of $85,000/year is enough money to pay off his initial investment in just four years. So in essence, Foley bought himself an annuity guaranteed to return 25-percent a year for as long as he lives -- potentially millions of dollars.
And you're going to pay for it.
"This is not fair to the taxpayers," said State Rep. Karen May, who has been working with other lawmakers to close many of the state's most expensive pension loopholes.
Foley is not alone. Records acquired by FOX Chicago News show six union officials -- all still in their 50's -- have purchased pension credits. Chicago and Cook County Building Trades President Tom Villanova wrote a check for $371,000 and saw his city pension climb from just under $14,000/year to over $108,000/year.
Pension expert Bill Zettler said the special provision was slipped into state law decades ago by politicians eager to get union support. In his view, it's legalized corruption.
"[Foley is] getting a 25 percent return on his money because he's the head of a union and he's involved in city politics. He's a very powerful political player. You and I cannot get 25-percent," Zettler said.
Zettler ran the numbers for us, and based on actuarial tables those six union officials stand to collect an additional $12 million in city pension money over their expected lifetimes, all from an investment of $1.1 million.
We tried to talk with Foley about his perfectly legal pension payday. We introduced ourselves, said we'd like to ask him some questions, and he promised to be back in half an hour.
He never came back -- and he hasn't returned our phone calls.
We did reach Villanova and he wasn't happy.
"I've done everything they've asked me to do," he said. "I'm facing a tough election. This story's not gonna do me any favors."