Prazen v. Shoop

2013 IL 115035

IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS

(Docket No. 115035)
JOSEPH E. PRAZEN, Appellee, v. MARVIN SHOOP, JR., as
President of the Illinois Municipal Retirement Fund, et al.,
Appellants.

Opinion filed October 18, 2013.

JUSTICE THOMAS delivered the judgment of the court, with
opinion.
Chief Justice Kilbride and Justices Garman, Karmeier, and Theis
concurred in the judgment and opinion.
Justice Freeman dissented, with opinion, joined by Justice Burke.

OPINION

¶1 The Illinois Municipal Retirement Fund (IMRF) Board of
Trustees (Board) determined that plaintiff, Joseph E. Prazen, forfeited
his early retirement incentives (ERI), which amounted to
$307,100.50, by returning to work for an IMRF employer in violation
of section 7-141.1(g) of the Illinois Pension Code (Pension Code) (40
ILCS 5/7-141.1(g) (West 2010)). In reaching that determination, the
Board found that the plaintiff’s corporation was created as a “guise”
to avoid the return-to-work prohibitions contained in the statute. On
administrative review, the circuit court of Sangamon County
confirmed. The appellate court reversed, however, finding that the
Board did not have the authority to determine that plaintiff’s actions
were a guise for circumventing the forfeiture provisions found in
section 7-141.1(g). 2012 IL App (4th) 120048, ¶ 37.
¶2 The Board filed a petition for leave to appeal with this court (Ill.
S. Ct. R. 315 (eff. Feb. 26, 2010)), and we allowed the petition. For
the reasons that follow, we affirm the appellate court’s judgment.

¶3 BACKGROUND
¶4 On December 31, 1998, plaintiff retired from his position as
superintendent of the electrical department of the City of Peru, Illinois
(City), under the early retirement incentive plan (ERI plan) that had
been adopted by the City pursuant to section 7-141.1 of the Pension
Code. Prior to his retirement, plaintiff purchased five years of age
enhancement credit that boosted his years of service to 32.833. At the
time of retirement, his annual salary was $82,284.20.
¶5 Three years earlier, in 1995, plaintiff formed a business known as
Peru Development Land Trust (PDLT) with the then-mayor of Peru,
Donald Baker. The purpose of PDLT was to renovate and convert real
estate. In 1995, PDLT purchased a vacant building with the intention
of turning it into condominiums. The renovation required extensive
electrical upgrades and modifications. Plaintiff planned to perform
this work through his business, Electrical Consultants, Ltd. (ECL),
which at that time was not yet incorporated.
¶6 On December 18, 1998, approximately two weeks before his
retirement from his job with the City, plaintiff incorporated ECL. At
the time of incorporation, he was the secretary and president of the
corporation. Plaintiff’s wife later took over as secretary and president.
¶7 On December 21, 1998, three days after ECL’s incorporation and
10 days prior to plaintiff’s retirement, ECL and the City entered into
a management and supervision agreement for operation of the
electrical department (the Agreement) to begin on January 1, 1999,
one day after plaintiff retired. According to the affidavit of Mayor
Donald Baker, who signed the Agreement on behalf of the City, it
was the City’s intent in entering the Agreement to buy itself more
time to find a replacement for plaintiff. It was also the intent of the
City to have the liability for performance of the Agreement to be
placed with ECL and not plaintiff personally.
¶8 Under the Agreement, ECL was to provide a full-time person to
perform the contractor’s duties for the City for a term of three years,
with the first year of compensation set at $89,816.74 to be paid on a
biweekly basis to ECL. The Agreement stated that “[a]ll work,
services, and other functions furnished or to be performed by [ECL)

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 for the City *** shall be in [ECL’s] position as an independent
contractor and to no extent and in no manner shall either [ECL] or
any of its personnel *** be regarded as an employee, servant, or agent
of the City.” The Agreement gave the City the right to terminate it
“upon reasonable cause determined within the City’s sole discretion”
following a 30-day written notice to ECL. There was no
corresponding right on the part of ECL to terminate, and the initial
term of the Agreement was for a three-year period. The Agreement
between ECL and the City was extended eight times following its
initial execution. It was not until the parties executed an eighth rider
to the Agreement in August 2008 that ECL was also given the right
to terminate the Agreement with a 30-day written notice.
¶9 Once prior to the execution of the Agreement between ECL and
the City and twice afterwards, plaintiff’s attorney, Douglas
Schweickert, who was also outside legal counsel for the City,
contacted IMRF on plaintiff’s behalf to inquire about any impact the
structure of the Agreement might have on plaintiff’s IMRF pension.
Schweickert documented these conversations with the IMRF in three
letters that he wrote to plaintiff.
¶ 10 The first letter—dated September 15, 1998, which was over two
months before ECL’s incorporation and plaintiff’s retirement from
the City—stated that an IMRF representative had advised
Schweickert that “a former employee who elected the Early
Retirement Incentive may work for a non-IMRF employer.” It was
explained to Schweickert that the City could contract with a
corporation for certain services even though the corporation employs
a former City employee who elected the early retirement incentive.
According to Schweickert, the IMRF representative also told him that
“a former City employee may also contract with an IMRF employer
as an independent contractor.”
¶ 11 In the second letter dated March 21, 2002, Schweickert informed
plaintiff that he had again contacted IMRF at plaintiff’s request. This
time an IMRF representative confirmed that everything in the
September 1998 letter still applied and that there had been no changes
in IMRF regulations.
¶ 12 In the last letter dated November 19, 2002, Schweickert explained
to plaintiff as follows:
“[The IMRF representative] confirmed that a retired ‘early
out’ IMRF employee may work for a separate corporation
which is then contracted to do work for the City from which

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 the IMRF employee retired. I specifically questioned whether
that retired IMRF employee may be an owner of the
corporation contracting with the City. She stated that was
permiss[i]ble, but she added that the corporation cannot just
be a guise to avoid the IMRF regulations. Specifically, if the
corporation hires itself out to the general public in addition to
the municipality for which it has contracted, that would be
fine.”
Schweickert suggested to plaintiff that he should advertise to expand
ECL’s visibility and hire other employees, even if only for brief
assignments.
¶ 13 ECL employed three people during its existence—plaintiff, his
wife Diane, and their daughter Natalie. The City paid ECL biweekly,
as called for by the Agreement. ECL then paid its employees.
Plaintiff, Diane and Natalie received W-2 forms from ECL for each
year they worked for the corporation.
¶ 14 On February 17, 2009, ECL informed the City in writing that it
would be terminating the Agreement effective March 18, 2009, as
allowed by the eighth rider extending the Agreement. ECL was
voluntarily dissolved on November 30, 2009. After the Agreement
between the City and ECL was terminated, the City continued to rely
upon independent contractors to perform the duties described in the
Agreement.
¶ 15 On November 5, 2010, nearly one year after ECL was dissolved
and almost 12 years after plaintiff retired, general counsel for IMRF
notified plaintiff by letter that the IMRF made a staff determination
that plaintiff’s continued “relationship” with the City after his 1999
retirement violated the provisions of section 7-141.1(g) of the
Pension Code. Subsection (g) of section 7-141.1 prohibits an
annuitant who has received any age enhancement or creditable service
under ERI from later either accepting “employment with” or entering
into a “personal services contract with” an IMRF employer. 40 ILCS
5/7-141.1(g) (West 1998). Attached to the letter were new
calculations based on plaintiff’s retirement at 27.333 years and
showing a $307,100.50 overpayment as a result of plaintiff’s ERI
violation. The letter did not state how IMRF would collect the
overpayment from plaintiff.
¶ 16 Plaintiff timely appealed the staff determination to the IMRF
benefit review committee. The IMRF benefit review committee
conducted hearings on June 23, 2011, and July 21, 2011. The findings

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and conclusions of the IMRF benefit review committee stated in part
as follows:
“The ability of the Board to determine whether or not
[plaintiff] is an employee is irrelevant to this proceeding
because no such determination is being made.
***
Under the facts of this appeal, [plaintiff] violated the
provisions of Section 7-141[.1](g) because EC[L] was created
as a guise to avoid the return to work prohibitions contained
therein. More specifically, [plaintiff’s] actions are contrary to
the intent of the return to work prohibitions, which were
enacted to offer an [sic] mechanism to allow individuals who
are at least age 50 with 20 years of service to purchase service
time and thus retire with a higher benefit at an earlier age. ERI
was created as a financial incentive to employers (they could
either not replace the retiree or hire younger employees at a
lower salary). Allowing an employee to retire with a higher
benefit and yet return to work under a contract was exactly
what the General Assembly was trying to avoid when it
enacted the ERI statute with the return to work prohibitions.
Specifically the Committee took the following into
consideration when making this determination:
[1] The timing surrounding the creation and dissolution of
EC[L].
[2] The timing surrounding the Agreement with the City
as it relates to [plaintiff’s] retirement.
[3] The de minimis nature of EC[L]’s employment outside
the agreement with the City.
[4] The fact that [plaintiff], his wife, and his daughter
were the only employees of EC[L].
[5] The fact that [plaintiff], at the time of the original
execution of the Agreement, was both secretary and president
of EC[L].
[6] The nature of the duties required under the Agreement
and the fact that [plaintiff] alone fulfilled its requirement for
a full-time staff person.”
On July 22, 2011, the IMRF Board voted to uphold the administrative
staff determination and adopted the findings and conclusions set forth
in the Board’s benefit review committee report. Plaintiff appealed to

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 the circuit court of Sangamon County. The circuit court confirmed the
Board’s decision.
¶ 17 Plaintiff then appealed to the appellate court, which reversed,
holding that an ERI annuitant must have accepted “employment with”
or entered into a “personal services contract with” an IMRF
participating municipality to be subject to the forfeiture provisions of
section 7-141.1(g). 2012 IL App (4th) 120048, ¶ 38. Here, the
Agreement was between the City and ECL—a distinct legal
entity—not between the City and plaintiff. Id.
¶ 18 The appellate court also held that the legislature did not grant the
IMRF Board power to find a corporation was created solely as a guise
to circumvent the forfeiture criteria of section 7-141.1(g). Id. ¶ 37. In
the appellate court’s view, finding a corporation to be a guise under
the present circumstances created a new condition—of which an
annuitant has no notice, and which is in direct conflict with the two
conditions for forfeiture listed in section 7-141.1(g). Id. Finally, the
appellate court found that a determination that a corporation is a guise
is akin to a determination that the corporate veil can be pierced. Id.
¶ 38. The appellate court concluded that “[w]hile the legislature gave
the IMRF Board the power to make administrative decisions on
participation and coverage necessary for carrying out the intent of the
Fund, this general power does not include equitable remedies
generally reserved for the courts.” Id.
¶ 19 The Board filed a petition for leave to appeal with this court. We
allowed that petition.

¶ 20 ANALYSIS
¶ 21 The outcome of this case turns on the interpretation of a statute,
and therefore it presents a question of law that we review de novo.
Board of Education, Joliet Township High School District No. 204 v.
Board of Education, Lincoln Way Community High School District
No. 210, 231 Ill. 2d 184, 194 (2008); Hooker v. Retirement Board of
the Firemen’s Annuity & Benefit Fund, 2012 IL App (1st) 111625, ¶
13. The primary objective in construing a statute is to ascertain and
give effect to the intent of the legislature. Chicago Teachers Union,
Local No. 1 v. Board of Education of the City of Chicago, 2012 IL
112566, ¶ 15. The most reliable indicator and best evidence of
legislative intent is the language used in the statute itself, which must
be given its plain and ordinary meaning. Roselle Police Pension
Board v. Village of Roselle, 232 Ill. 2d 546, 552 (2009). Additionally,

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 in determining the legislative intent of a statute, a court may consider
not only the language used, but also the reason and necessity for the
law, the evils sought to be remedied, and the purposes to be achieved.
Williams v. Staples, 208 Ill. 2d 480, 487 (2004). Words and phrases
should be construed in light of other relevant provisions of the statute
and must not be interpreted in isolation. Id. Each word, clause and
sentence of a statute must be given a reasonable meaning, if possible,
and should not be rendered superfluous. Chicago Teachers Union,
2012 IL 112566, ¶ 15.
¶ 22 At issue in this case is the ERI forfeiture provision of section 7-
141.1(g) of the Pension Code. That section provides in relevant part
as follows:
“An annuitant who has received any age enhancement or
creditable service under this Section and thereafter accepts
employment with or enters into a personal services contract
with an employer under this Article thereby forfeits that age
enhancement and creditable service ***. A person forfeiting
early retirement incentives under this subsection (i) must
repay to the Fund that portion of the retirement annuity
already received which is attributable to the early retirement
incentives that are being forfeited, (ii) shall not be eligible to
participate in any future early retirement program adopted
under this Section, and (iii) is entitled to a refund of the
employee contribution paid under subsection (f). The Board
shall deduct the required repayment from the refund and may
impose a reasonable payment schedule for repaying the
amount, if any, by which the required repayment exceeds the
refund amount.” (Emphases added.) 40 ILCS 5/7-141.1(g)
(West 2010).
¶ 23 Before this court, the parties differ as to the proper interpretation
to be given section 7-141.1(g). The Board argues that the terms
“employment with” and “personal services contract with” are
ambiguous. The Board acknowledges that it did not make any specific
determination in the proceeding below that either of these two
conditions were violated. Nonetheless, the Board argues here that
those terms should be liberally construed to effectuate the intent of
the statute. The Board contends that a look at section 7-141.1 of the
Pension Code as a whole shows that it was enacted as a cost savings
device to allow highly paid senior employees to retire early and either
not be replaced at all or be replaced with employees earning a lower

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 salary. Therefore, the Board suggests that section 7-141.1(g) be read
so as to take away any incentive for a worker to retire early, create a
corporation, become employed by that corporation, contract with the
former IMRF employer through that corporation and then simply go
back to work at essentially the same job. Additionally, the Board
argues that even if plaintiff did not specifically violate either of the
two expressed conditions for forfeiture contained in the statute, the
Board nonetheless had the authority to find a forfeiture based on the
corporate arrangement set up by plaintiff.
¶ 24 We first reject the Board’s argument that the terms in question are
ambiguous. Neither “employment” nor “personal services contract”
are defined in the Pension Code, but we find the terms to be
sufficiently plain and clear nonetheless. Even though the term
“employment” is not defined, the term “employee” is defined in the
Pension Code in relevant part as a person who (1) is paid “for the
performance of personal services or official duties out of the general
fund of a municipality” or a fund controlled by a municipality, or (2)
“[u]nder the usual common law rules applicable in determining the
employer-employee relationship, has the status of an employee with
a municipality.” 40 ILCS 5/7-109 (West 2010). The appellate court
found that to be “employed with” an IMRF employer, a person must
first fit the definition of “employee.” 2012 IL App (4th) 120048, ¶ 29.
We agree with that assessment. Here, plaintiff was not employed with
the City after his retirement in 1998. Rather, plaintiff was employed
by ECL, a separate legal entity.
¶ 25 The Board does not dispute that plaintiff was no longer an
“employee” of the City once he retired in 1998. However, the Board
resists application of the definition of “employee” found in section 7-
109 of the Pension Code to inform the decision of what constitutes
“employment with” under section 7-141.1(g). Instead, the Board
relies upon a Black’s Law Dictionary definition of “employment,”
which defines it as “[w]ork for which one has been hired and is being
paid by an employer.” Black’s Law Dictionary 566 (8th ed. 2004).
But this definition does not support the Board’s position either, as the
Board hired and paid ECL, not plaintiff. Thus, even under the
definition of employment supplied by the Board, plaintiff did not
enter into “employment with” an IMRF employer following his
retirement on December 31, 1998.
¶ 26 We also find the term “personal services contract” to be clear.
Although the Pension Code does not define the phrase and there is a

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 dearth of Illinois case law discussing its parameters, courts in other
jurisdictions have been almost uniform in defining it as “ ‘[a] contract
which contemplates the performance of personal services involving
the exercise of special knowledge, judgment, taste, skill, or ability.’ ”
Doltz v. Harris & Associates, 280 F. Supp. 2d 377, 388 (E.D. Pa.
2003) (quoting In re Compass Van & Storage Corp., 65 B.R. 1007,
1011 (Bankr. E.D.N.Y. 1986)). Typical personal services contracts
are ones that require a specific person to perform the contract with
“rare genius and extraordinary skill” and are nontransferable,
nonassignable and are therefore personal. Taylor v. Palmer, 31 Cal.
240, 247-48 (1866); see also In re Herlan, No. 09-2665, 2010 WL
56019, at *7 (Bankr. N.D. W. Va. 2010). That an agreement is
between two corporations and does not identify any individual as
being material to its performance are facts that weigh strongly against
(if they are not indeed fatal) to construing the agreement as a
“personal services contract.” Fransmart, LLC v. Freshii
Development, LLC, 768 F. Supp. 2d 851, 860-61 (E.D. Va. 2011)
(mem. op.).
¶ 27 Black’s Law Dictionary appears to be in full agreement with the
above-noted principles culled from the case law. According to
Black’s Law Dictionary, a “personal contract” is defined as “[a]
contract that binds a person but not that person’s heirs or assignees
because the contract requires a personal performance for which there
is no adequate substitute.” Black’s Law Dictionary 347 (8th ed.
2004).1
¶ 28 In the present case, the Board did not make a determination that
plaintiff entered into a “personal services contract with” the City. But

1
Additionally, Black’s Law Dictionary simply defines a “service
contract” as “[a] contract to perform a service.” Black’s Law Dictionary
348 (8th ed. 2004). Moreover, we note that under certain federal
regulations governing fairness in obtaining government contracts, the term
“personal services contract” is a term of art that would be of no benefit to
the Board’s position in the present case. Under federal regulation, a
“personal services contract” is one in which the contractor’s employees are
under the direction and supervision of the government, but a “[n]onpersonal
services contract” is one under which the contractor is an independent
contractor. See, e.g., 48 C.F.R. § 37.101 (2013); 32 C.F.R. §§ 107.1 to
107.6 (2013); see also Horn v. United States, 98 Fed. Cl. 500, 502 (2011);
Glen v. Performance Anesthesia, P.A., No. 5:09-CV00309-BR (Aug. 27,
2010) (unpublished order).

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 the Board nevertheless now argues that the term is ambiguous and
that plaintiff should be deemed to have entered such a contract. We
conclude, however, that the term is clear and unambiguous and that
any determination that plaintiff had entered such a contract based on
the record before us would have been clearly erroneous given the
undisputed facts. Here, we again note that the Agreement was
between the City and ECL. More importantly, the Agreement did not
require that plaintiff personally perform any of the services described
in it. Rather, the Agreement expressly provided that ECL was an
independent contractor and that ECL was simply responsible to
“provide a qualified full time person to perform the duties” described.
Again, nothing in the Agreement required plaintiff to perform any
personal services. We further note that even though ECL only had
three employees during its existence and plaintiff was the only one of
those three qualified to perform the duties mentioned, there was
nothing in the Agreement that would have prevented ECL from hiring
another qualified contractor to perform the supervision and
management services listed. Thus, plaintiff’s personal performance
of the duties was not material to the contract. Under these
circumstances, plaintiff did not enter into a personal services contract
with the City.
¶ 29 We now turn to the Board’s argument that it had the authority to
determine that plaintiff forfeited a portion of his pension because, in
its view, ECL was a guise to circumvent the restrictions of section 7-
141.1(g). In support of its argument, the Board relies upon the general
grant of authority under section 7-200 of the Pension Code to make
“administrative decisions on participation and coverage” to carry out
the intent of the fund. See 40 ILCS 5/7-200 (West 2010). The Board
also relies upon the general fiduciary duty on the part of the boards of
all Illinois pension funds to act prudently in accordance with the
provisions of the Pension Code. See 40 ILCS 5/1-109 (West 2010);
see also Marconi v. Chicago Heights Police Pension Board, 225 Ill.
2d 497, 544 (2006) (an important function of a pension board is to
ensure adequate financial resources to pay benefits to those who
qualify by screening unqualified or fraudulent claims).
¶ 30 We have no disagreement with the principles cited by the Board,
but we find that the Board’s attempt to override the two specific
conditions for forfeiture and find a third ground upon which forfeiture
may rest is misplaced given the lack of any clear intent in the pension

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 statute to allow the Board to find a forfeiture under the present
circumstances.
¶ 31 The legislative findings and declarations in subsection (a) of
section 7-141.1 state as follows:
“(a) The General Assembly finds and declares that:
(1) Units of local government across the State have
been functioning under a financial crisis.
(2) This financial crisis is expected to continue.
(3) Units of local government must depend on
additional sources of revenue and, when those sources are
not forthcoming, must establish cost-saving programs.
(4) An early retirement incentive designed specifically
to target highly-paid senior employees could result in
significant annual cost savings.
(5) The early retirement incentive should be made
available only to those units of local government that
determine that an early retirement incentive is in their best
interest.
(6) A unit of local government adopting a program of
early retirement incentives under this Section is
encouraged to implement personnel procedures to
prohibit, for at least 5 years, the rehiring (whether on
payroll or by independent contract) of employees who
receive early retirement incentives.
(7) A unit of government adopting a program of early
retirement incentives under this Section is also
encouraged to replace as few of the participating
employees as possible and to hire replacement employees
for salaries totaling no more than 80% of the total salaries
formerly paid to the employees who participate in the
early retirement program.
It is the primary purpose of this Section to encourage units
of local government that can realize true cost savings, or have
determined that an early retirement program is in their best
interest, to implement an early retirement program.” 40 ILCS
5/7-141.1(a) (West 2010).
¶ 32 Furthermore, subsection (b) of the same statutory section then
requires that in order to validly join the early retirement incentives
program, a municipality must adopt an ordinance that, among other

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 things, requires the municipality to resolve to “use its best efforts” to
limit the number of employees who replace employees who retire
early, or limit the salaries paid to employees who replace the
employees who retire early under the ERI program. 40 ILCS 5/7-
141.1(b) (West 2010). Importantly, subsection (b) continues on to
merely require that the municipality resolve that “a person who retires
under the [ERI] program shall lose those incentives if he or she later
accepts employment with any IMRF employer in a position for which
participation in IMRF is required or is elected by the employee.”
(Emphasis added.) 40 ILCS 7/5-141.1(b) (West 2010).
¶ 33 From the above-quoted provisions, it is clear that the legislature
recognized that local governments have been operating under
financial crisis, that the ERI program is designed to target highly paid
senior employees, and that implementation of the program could
result in cost savings. However, nothing in the legislative declarations
evinces a clear intent that the ERI forfeiture prohibitions be
interpreted so as to result in forfeiture in a situation like the present
one. First, we note that subsection (a), which sets forth the intent and
purpose of the statute, provides that a participating municipality is
merely “encouraged” (not required) either to not replace a retiring
employee or to replace him at a lesser salary. Also, while the
legislature meant to encourage this, it also recognized that in some
cases it would not be possible to get by without replacing the retiring
employee at the same high salary. Second, we note that a participating
municipality is merely “encouraged” to prohibit (and only for five
years) the rehiring (by independent contract or payroll) of employees
who receive ERI. Finally, in subsection (b), the participating
municipality is simply required to resolve that a person who retires
early forfeits his ERI if he accepts “employment with any IMRF
employer in a position for which participation in IMRF is required or
is elected by the employee.” 40 ILCS 5/7-141.1(b) (West 2010). Here,
of course, plaintiff did not accept “employment with” an IMRF
employer after his retirement on December 31, 1998, and it is
undisputed that his position with ECL after his retirement did not
require IMRF participation nor was such participation elected (and in
fact it could not have been elected).
¶ 34 Thus, it appears that contrary to the Board’s argument, the intent
of the legislature was actually fulfilled in this case. ECL’s contract
with the City did not allow for plaintiff’s continued participation in
the IMRF, as plaintiff was not an employee of the City. The City thus

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 did not have to make pension contributions as it would have had to
do had it hired an employee. Undoubtedly, the City also saved by
avoiding paying other employee benefits that would have been
necessary in an employment context. We also note that ECL was
bound by the Agreement for an initial three-year term without the
same right to terminate that the City possessed upon 30 days written
notice. This provision allowed the City the option of searching for an
employee to fill the role needed or of simply continuing to rely upon
ECL.
¶ 35 On the other hand, we realize that the arrangement effected in the
present case was a lucrative one for plaintiff. He was allowed to retire
early and was then able to earn significant income through ECL’s
contract with the City. However, the fact that plaintiff may have taken
advantage of a windfall or that the Board sees a loophole in the
statute does not mean that this court may “sit as a superlegislature to
weigh the wisdom of legislation [or] to decide whether the policy
which it expresses offends the public welfare.” (Internal quotation
marks omitted.) Roselle, 232 Ill. 2d at 557. We must construe and
apply statutory provisions as they are written and cannot rewrite them
to make them consistent with the judiciary’s view of orderliness and
public policy. Id. at 558.
¶ 36 It is well settled that an administrative agency is a creature of
statute and therefore any power or authority claimed by it must find
its source in the provisions of the statute that created it. County of
Knox ex rel. Masterson v. The Highlands, LLC, 188 Ill. 2d 546, 554
(1999). Moreover, a determination of the scope of the agency’s power
and authority is a question of law for the judiciary to resolve and is
not an issue to be finally determined by the agency itself. Id.
¶ 37 Here, the legislature did not grant the Board power to find a
corporation was a guise to circumvent the forfeiture provisions set
forth in section 7-141.1(g) of the Pension Code. The legislature
granted the Board the power to “carry on generally any other
reasonable activities” necessary to carry out the intent of the IMRF.
See 40 ILCS 5/7-200 (West 2010). We agree with the appellate court
that creating a new condition for forfeiture—of which the annuitant
has no notice from the clear terms of the statute itself—is not a
reasonable activity. We also agree that had the legislature intended to
give the Board discretion to invent new conditions to find forfeiture
of ERI, it surely would have stated so. See 2012 IL App (4th) 120048,
¶ 37. It would be profoundly unjust to uphold the forfeiture in the

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 present case where the statute clearly lists only two conditions for
forfeiture and neither was violated. If the legislature intended further
conditions to apply, this would be a situation that would cry out for
legislative line-drawing. The IMRF Board’s superimposed criteria
appears to be vague, unworkable and evolving over time.
¶ 38 We will not presume that the legislature intended to create a
condition for forfeiture of pension benefits where the statute is silent
on the subject. See Shields v. Judges’ Retirement System of Illinois,
204 Ill. 2d 488, 496-97 (2003). It is the dominion of the legislature to
enact laws and the courts to construe them, and we can neither restrict
nor enlarge the meaning of an unambiguous statute. Id. at 497.
¶ 39 Moreover, it is beyond dispute that to the extent there is any
question as to legislative intent and the clarity of the language of a
pension statute, it must be liberally construed in favor of the rights of
the pensioner. Taddeo v. Board of Trustees of the Illinois Municipal
Retirement Fund, 216 Ill. 2d 590, 596 (2005); Shields, 204 Ill. 2d at
494; see also Roselle, 232 Ill. 2d at 552-53 (if the legislative intent is
“obvious” from the language of the statute, it will be given effect
regardless of the well-settled canon that statutory provisions of a
pension statute should be liberally construed in favor of the
pensioner). To adopt the Board’s construction in this case, then,
would be inconsistent with both our obligation to construe pension
statutes liberally in favor of the pensioner and to give effect to the
plain meaning of the words used in the statute.
¶ 40 We also acknowledge the general rule that the interpretation of a
statute by the agency charged with its administration is given some
deference; but this rule is not binding and if the interpretation is
erroneous, it will be rejected. Taddeo, 216 Ill. 2d at 595. Here, the
Board’s interpretation is not only erroneous, but is one that appears
to have been inconsistent and evolving over the years.
¶ 41 The IMRF’s inconsistency over the years is shown by the fact that
in September 1998, two months before plaintiff retired, the IMRF
advised plaintiff’s attorney that the City could contract with a
corporation for services even though the corporation employs a
former City employee who elected the ERI and also that a former City
employee could contract with an IMRF employer as an independent
contractor. This interpretation was confirmed by the IMRF a few
years later in March 2002. Seven months later, however, the IMRF
told plaintiff’s counsel that a retired IMRF employee may be the
owner of the corporation contracting with the City, but the

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 corporation cannot just be a guise and would have to hire itself out to
the general public also. This apparently represented a retreat from
IMRF’s earlier position that the City could contract with a retired
former IMRF employee on an independent-contractor basis. Then, in
July 2011, when the IMRF Board made its determination that plaintiff
forfeited a portion of his pension because his corporation was a
“guise,” it relied upon a host of never-before-mentioned factors,
including the nature and amount of the corporation’s non-City
contracts, the number of employees in the corporation, and the timing
surrounding its creation.
¶ 42 At any rate, we note that our determination of the outcome in this
case would have been different if, from our reading of the statute as
a whole, we were able to conclude that the legislature had a clear
intent to inhibit the sort of corporate contract involved in this
case—i.e., one that outsourced the supervision of the City’s electrical
department to a legally valid corporation controlled by a retired IMRF
employee—by making the retired employee’s ERI subject to
forfeiture on account of the arrangement. But we can find no such
intent in this case.
¶ 43 From our reading of the statute, we believe that it is possible that
the General Assembly believed that prohibiting an annuitant from
being employed by a corporation (regardless of the annuitant’s role
in forming the corporation) that contracts with the annuitant’s former
IMRF employer would hamper a local governmental entity’s ability
to maintain a quality workforce. Or the General Assembly may have
believed that such a bar was unnecessary because a municipality
should be able to choose on its own whether entering into a contract
with a self-incorporated annuitant through a corporation on an
independent-contractor basis was a better fiscal option than hiring an
employee to do the same work and having to pay the commensurate
employee benefits.
¶ 44 We believe that had the General Assembly wanted to make a
continued “relationship” with an IMRF employer through a
corporation grounds for forfeiture under section 7-141.1(g), then the
statute would have spoken directly to the matter. We therefore find,
as the appellate court did, that if the ruling we reach here is
“something the General Assembly wanted to avoid, then legislative
action is required” to address the problem directly and provide
sufficient guidelines for the Board to follow in making its
determination. See 2012 IL App (4th) 120048, ¶ 40.

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¶ 45 Our resolution of the foregoing issues renders it unnecessary to
address the remaining issues raised by the parties.

¶ 46 CONCLUSION
¶ 47 For all of the above reasons, we conclude that the Board had no
authority under the Pension Code to conclude that plaintiff’s legally
valid corporation was a guise to circumvent the forfeiture provisions
of section 7-141.1(g). Accordingly, we affirm the judgment of the
appellate court.

¶ 48 Affirmed.

¶ 49 JUSTICE FREEMAN, dissenting:
¶ 50 The majority today holds that the Illinois Municipal Retirement
Fund (IMRF) Board of Trustees (Board), a fiduciary under the Illinois
Pension Code (Pension Code), had no authority to determine that
plaintiff’s corporation was a guise to circumvent the forfeiture
provisions of the Early Retirement Incentive (ERI) statute. In other
words, under the majority’s decision the Board, a fiduciary, had no
authority to perform its fiduciary function. I disagree, and therefore
respectfully dissent.

¶ 51 I
¶ 52 On December 31, 1998, plaintiff retired from his position as
superintendent of the electrical department of the City of Peru, Illinois
(City), under the ERI program the City had adopted pursuant to
section 7-141.1 of the Pension Code (40 ILCS 5/7-141.1 (West
2010)). This program allowed participating employees to purchase
age enhancement credits which in turn allowed the employee to retire
early with a higher pension. Prior to his retirement, plaintiff
purchased five years of age enhancement credit, so that, according to
the record, his pension was based on 32.833 years of service credit
rather than 27.333 years.
¶ 53 On December 18, 1998, about two weeks before his retirement,
plaintiff incorporated Electrical Consultants, Ltd. (ECL). At the time
of incorporation, plaintiff was the secretary and president of ECL.
Plaintiff’s wife, Diane, later took over as secretary and president.

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 During its existence, ECL never had more than three employees:
plaintiff, his wife, and their daughter Natalie.
¶ 54 On December 21, 1998, three days after ECL’s incorporation and
10 days prior to plaintiff’s retirement, ECL and the City entered into
a “Management and Supervision Agreement for Operation of the
Electric Department” (Agreement). The three-year Agreement began
on January 1, 1999, the day after plaintiff retired. It required ECL to
provide a qualified full-time person to perform the contractor’s duties
for the City, including electrical management and supervisory
services. Plaintiff was the only one of ECL’s three employees
qualified to perform these duties.
¶ 55 Under the Agreement, the City paid ECL $89,816.74 for the first
year (about $7,000 more than plaintiff’s $82,284.20 annual salary
when he retired), with increases in subsequent years based on the
Consumer Price Index. The Agreement was extended eight times,
with its final term ending in March 2009. The Agreement thus was in
effect for approximately 10 years, during which the City paid ECL a
total of $1,075,398.92. During this same period, plaintiff continued
to receive his enhanced ERI pension. ECL was dissolved on
November 30, 2009, approximately eight months after its Agreement
with the City ended.
¶ 56 The Agreement and each of the eight riders extending it were
executed on behalf of the City by then-Mayor Donald Baker, who was
also plaintiff’s business partner.2 According to Baker’s affidavit, it
was the City’s intent, in entering the Agreement, to contract with ECL
“only until such time as a permanent replacement for the position of
Superintendent of the Electrical Department could be located.” Baker
averred, in addition, that the City intended to find such a replacement
“as quickly as possible.”
¶ 57 On three occasions (one in September 1998, one in March 2002
and the third in November 2002), plaintiff’s attorney, Douglas
Schweickert, who was also outside legal counsel for the City,
contacted IMRF on plaintiff’s behalf to inquire about any impact the
Agreement might have on plaintiff’s pension. Schweickert
documented these conversations with IMRF representatives in three
letters he wrote to plaintiff. These letters generally indicate that the

2
In 1995, plaintiff and Baker, among others, created Peru Development
Land Trust (PDLT) in order to renovate and convert real estate in Peru,
Illinois.

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 IMRF representatives assured Schweickert that plaintiff’s corporate
arrangement with the City was acceptable. In the third letter,
Schweickert told plaintiff the IMRF representative specifically
indicated that an ERI retiree could work for a separate corporation
which contracted to do work for the City, even if the ERI retiree was
an owner of that corporation. In that event, however, the corporation
could not just be a guise to avoid IMRF regulations.
¶ 58 On April 5, 2009, a few weeks after the City’s Agreement with
ECL ended, Scott Harl was elected the City’s new mayor. He was
sworn in on April 27. According to his affidavit, he chose not to fill
the position of superintendent of the electrical department, but named
a department foreman “as Supervisor of the Electrical Department.”
Mayor Harl averred, in addition, that for duties that typically fall
under the purview of the superintendent, such as engineering tasks
and management, the City relies on “outside vendors, engineering
companies, and the like.”
¶ 59 On November 5, 2010, the IMRF general counsel notified
plaintiff by letter that the IMRF made a staff determination that
plaintiff’s continued relationship with the City after his retirement
triggered the forfeiture provisions of section 7-141.1(g) of the
Pension Code. Plaintiff appealed to the IMRF Benefit Review
Committee, which concluded plaintiff forfeited his ERI benefits
because ECL, plaintiff’s corporation, “was created as a guise to avoid
the return to work prohibitions” of section 7-141.1(g). The IMRF
Board confirmed the decision of the Benefit Review Committee,
including the determination that plaintiff forfeited his early retirement
incentives in the amount of $307,100.50, which was to be recovered
by withholding a percentage of his retirement annuity (pension
payments) over a reasonable period.3 The circuit court confirmed the
Board’s decision, and the appellate court reversed, vacating the
Board’s decision. 2012 IL App (4th) 120048. The majority today
affirms the judgment of the appellate court.

3
According to the Board, from 1998-2010 plaintiff received pension
payments totaling $668,349.95. IMRF sought to recover only that portion
attributable to plaintiff’s early retirement, which was $307,100.50.

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¶ 60 II
¶ 61 Under subsection (g) of section 7-141.1 (40 ILCS 5/7-141.1(g)
(West 2010)), an ERI annuitant such as plaintiff who “accepts
employment with or enters into a personal services contract with” an
IMRF employer thereby forfeits his age enhancement and creditable
service benefits. In concluding plaintiff forfeited his ERI benefits, the
Board made no specific determination that either of these two
statutory conditions were met. Instead, the Board concluded that
plaintiff’s corporation, ECL, was created as a guise to avoid the
section 7-141.1(g) prohibitions against accepting employment with
or entering into a personal services contract with an IMRF employer.
In other words, the Board determined that plaintiff committed a fraud
against the IMRF.
¶ 62 My colleagues in the majority reject this reasoning, holding that
the Board “had no authority under the Pension Code to conclude that
plaintiff’s legally valid corporation was a guise to circumvent the
forfeiture provisions of section 7-141.1(g).” Supra ¶ 47. The majority
emphasizes that an administrative agency such as the Board “is a
creature of statute and therefore any power or authority claimed by it
must find its source in the provisions of the statute that created it.”
Supra ¶ 36 (citing County of Knox ex rel. Masterson v. The
Highlands, LLC, 18 Ill. 2d 546, 554 (1999)).
¶ 63 The only two conditions for forfeiture listed in subsection (g) are
(1) accepting employment with or (2) entering into a personal
services contract with an IMRF employer. In the majority’s view, the
terms “employment” and “personal services contract” are clear and
unambiguous. Under the plain meaning of “employment,” plaintiff
was not employed with the City after his retirement in 1998. “Rather,
plaintiff was employed by ECL, a separate legal entity.” Supra ¶ 24.
In addition, plaintiff clearly “did not enter into a personal services
contract with the City.” Supra ¶ 28.
¶ 64 The majority finds no support in the statute for what it considers
a “new condition” for forfeiture—the Board’s finding that ECL was
a “guise” to avoid the return-to-work prohibitions of subsection (g).
The majority states:
“We will not presume that the legislature intended to
create a condition for forfeiture of pension benefits where the
statute is silent on the subject. [Citation.] It is the dominion of
the legislature to enact laws and the courts to construe them,

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 and we can neither restrict nor enlarge the meaning of an
unambiguous statute.” Supra ¶ 38.
¶ 65 The majority thus holds that so long as there is literal compliance
with subsection (g), there is no forfeiture of ERI benefits, regardless
of the nature of the corporate or other arrangement utilized to reach
that result. According to the majority, the Board has no authority to
look into the arrangement to determine if it is fraudulent.
¶ 66 I disagree. The majority’s holding runs directly counter to section
1-109 of the Pension Code, which applies to all pension funds created
within the Pension Code. Section 1-109 charges the boards of these
funds as fiduciaries to act prudently and in “accordance with the
provisions of the Article of the Pension Code governing the
retirement system or pension fund.” 40 ILCS 5/1-109 (West 2010).
¶ 67 This court has clearly described this fiduciary duty. In Marconi v.
Chicago Heights Police Pension Board, 225 Ill. 2d 497 (2006),4 we
stated:
“This fiduciary duty, however, is owed to all participants in
the pension fund, not just plaintiff. Perhaps the most
important function of a pension board is to ensure adequate
financial resources to cover the Board’s obligations to pay
current and future retirement and disability benefits to those
who qualify for such payments. An important part of this
responsibility involves the screening of unqualified or
fraudulent disability claims, so that funds are not unfairly
diverted to undeserving applicants.” (Emphasis in original
and added.) Id. at 544.
¶ 68 This section 1-109 fiduciary duty bears some semblance to, but is
different from, the common law remedy known as piercing the
corporate veil. Under this remedy, courts in some circumstances will
disregard the corporate entity and find shareholders, directors, or
officers personally liable for corporate obligations. Ted Harrison Oil
Co. v. Dokka, 247 Ill. App. 3d 791, 795 (1993); Alpert v. Bertsch, 235
Ill. App. 3d 452, 460 (1992); Gallagher v. Reconco Builders, Inc., 91
Ill. App. 3d 999, 1004-05 (1980). Situations where a court may pierce
the corporate veil include circumstances where adherence to the

4
Marconi was a per curiam opinion in which Justices Burke and
Kilbride took no part. Justice Fitzgerald dissented, with opinion. Joining in
the per curiam opinion were Chief Justice Thomas and Justices Freeman,
Garman, and Karmeier.

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 fiction of a separate corporate existence would sanction a fraud,
promote injustice, or promote inequitable consequences. Ted
Harrison Oil Co., 247 Ill. App. 3d at 795; Alpert, 235 Ill. App. 3d at
460; Gallagher, 91 Ill. App. 3d at 1004. The gist of the remedy of
piercing the corporate veil is that “courts will not permit themselves
to be blinded or deceived by ‘mere’ forms of law—they will penetrate
behind the screen of a corporate entity to deal with the substance of
the transaction and the relationship of the parties involved.” Ronald
J. Broida, The History of the Development of the Remedy of “Piercing
the Corporate Veil,” 65 Ill. B.J. 522, 523 (1977).
¶ 69 Just as courts sometimes encounter circumstances where it is
necessary to disregard the corporate entity in order to prevent fraud
or injustice, pension boards face similar circumstances. Courts draw
their authority to pierce the corporate veil from the common law. In
the case of pension boards, the fiduciary duty is established by statute.
¶ 70 In the case at bar, plaintiff’s corporate arrangement with the City
presented a situation sufficient to authorize the Board, as a fiduciary,
to examine the arrangement to determine whether it was fraudulent.
Recall some of the details of plaintiff’s arrangement. About two
weeks before he retired as superintendent of the City’s electric
department, plaintiff incorporated ECL. Three days later, ECL
entered into a management and supervision agreement with the City
for operation of the electric department. The Agreement, which began
on January 1, 1999, the day after plaintiff retired, required ECL to
provide a qualified full-time person to perform the contractor’s duties
for the City, including electrical management and supervisory
services. Of ECL’s three employees—plaintiff, his wife, and their
daughter—plaintiff was the only one qualified to perform these
duties.
¶ 71 Under the Agreement, the City paid ECL $89,816.74 for the first
year (about $7,000 more than plaintiff’s $82,284.20 annual salary
when he retired), with increases in subsequent years based on the
Consumer Price Index. The Agreement was extended eight times,
with its final term ending in March 2009. The Agreement thus was in
effect for approximately 10 years, during which the City paid ECL a
total of $1,075,398.92. During this same period, plaintiff continued
to receive his enhanced ERI pension. ECL was dissolved on
November 30, 2009, approximately eight months after its Agreement
with the City ended.

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¶ 72 The Agreement and each of the eight riders extending it were
executed on behalf of the City by then-Mayor Donald Baker, who was
also plaintiff’s business partner. On April 5, 2009, a few weeks after
the City’s Agreement with ECL ended, Scott Harl was elected the
City’s new mayor. He was sworn in on April 27.
¶ 73 The majority’s holding today essentially bars the Board from
fulfilling its important fiduciary role of looking into or policing
corporate arrangements such as plaintiff’s, or any other potentially
fraudulent circumstance, in order to ensure that funds are not unfairly
diverted to undeserving applicants. In other words, the Board, a
fiduciary pursuant to section 1-109, has no authority to perform its
fiduciary function. This cannot be what the legislature intended.
¶ 74 I strongly disagree with the majority’s holding that the Board had
no authority under the Pension Code to conclude plaintiff’s
corporation was a guise to circumvent the forfeiture provisions of
section 7-141.1(g). I respectfully dissent.

¶ 75 III
¶ 76 While I would hold the Board has authority to police potentially
fraudulent claims to ensure that funds are not unfairly diverted to
undeserving applicants, the question remains whether the Board
properly applied that authority in the instant case. For example,
should the Board be estopped from finding forfeiture where, as here,
IMRF representatives apparently assured plaintiff’s attorney,
repeatedly, that plaintiff’s corporate arrangement with the City was
acceptable? The majority does not address this question here.
Accordingly, I do not address it in this dissent.

¶ 77 JUSTICE BURKE joins in this dissent.

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