Fresh from a crushing blow in the long-running battle over retiree health care, retired city employees are demanding to know why the city kept for itself $2.1 million in overcharges instead of refunding that money to retirees.

An audit and reconciliation process was required annually before Mayor Rahm Emanuel’s now-completed, three-year phaseout of retiree health care coverage and a 55 percent city subsidy for anyone who did not retire by Aug. 23, 1989.

It was through that process that retirees only recently discovered that the city received a $10.5 million settlement in 2013 from Blue Cross-Blue Shield, the company hired to administer health insurance claims for both active city employees and retirees.

Clint Krislov, an attorney representing retirees, said $1.07 million of that money was credited to retiree health care, including refunds. An additional $7.3 million stemmed from payments claims made by active city employees.

That leaves $2.1 million unaccounted for. Krislov wants to know where it went.

“We don’t know why this was a secret agreement and why the city refuses to tell us where the other $2.1 million went,” Krislov said Thursday.

“There’s $2.1 million unaccounted for, some of which probably should have been credited to retirees. For the period involved, the last half of 2013, it might double or triple the small refunds they received.”

It was only after the Illinois Appellate Court ruled in June on broader issues in the case that the city was required to audit and reconcile retiree health insurance claims for the last half of 2013.

When Krislov reviewed that auditors’ report and raised questions, he discovered the previously undisclosed $10.5 million settlement with Blue Cross-Blue Shield.

“The city’s determination not to disclose it or the method for allocating the proceeds just arouses suspicion,” he said.

The mayor’s office had no immediate comment.

An extra $2.1 million in refunds would be at least some consolation for more than 20,000 city employees and retirees dealt a crushing blow that could cost them dearly, but end up saving Chicago taxpayers $130 million a year.

In a six-word ruling on Thanksgiving eve, the Illinois Supreme Court refused to hear the retirees’ appeal of an Illinois Appellate Court ruling that essentially upheld Mayor Rahm Emanuel’s now-completed, three-year phaseout of retiree health care coverage and a 55 percent city subsidy for anyone who did not retire by Aug. 23, 1989.

The decision means retirees are only entitled to bare-bones protections outlined by lower courts.

In December 2015, Circuit Judge Neil Cohen ruled that the four city employee pension funds have an obligation to provide and subsidize retiree health care with funds provided by the city, but only at levels outlined in 1983 and 1985 amendments to the state’s pension code.

That guaranteed subsidy amounts to $55 a month for police and fire retirees not eligible for Medicare, and $21 for those who are. For retirees covered by the Municipal Employees and Laborers pension funds, the guaranteed monthly subsidy amounts to just $25.

Cohen applied those benefits only to those city employees who had retired by Aug. 23, 1989. The Illinois Appellate Court subsequently expanded that umbrella to cover everyone hired by early 2003, including current city employees.

Last week’s ruling is a particularly crushing blow to roughly 10,000 city employees because they started working for the city before April 1, 1986, their city work did not qualify them for Medicare.

They have been forced to choose between exorbitant premiums that, in some cases, are double their retirement checks or go without health insurance coverage at a time when they need it the most because of their age and declining health.