STATE OF NORTH CAROLINA



STATE OF NORTH CAROLINA IN THE OFFICE OF

ADMINISTRATIVE HEARINGS

COUNTY OF TYRRELL 05 DST 1167

| | | |

|MARTIN TODD OLIVER, |) | |

| |) | |

|Petitioner, |) | |

| |) | |

|v. |) | |

| |) | |

|TEACHERS’ AND STATE EMPLOYEES’ RETIREMENT SYSTEM OF NORTH CAROLINA, a corporation,|) | |

|BOARD OF TRUSTEES OF THE TEACHERS’ |) | |

|AND STATE EMPLOYEES’ RETIREMENT |) |DECISION |

|SYSTEM OF NORTH CAROLINA, |))))| |

|a body politic and corporate; |))))| |

|DEPARTMENT OF STATE TREASURER, |) | |

|RETIREMENT SYSTEMS DIVISION, and | | |

|THE STATE OF NORTH CAROLINA, | | |

| | | |

|Respondents. | | |

THIS MATTER was heard before the undersigned Augustus B. Elkins II, Administrative Law Judge, on November 21, 2005, in Raleigh, North Carolina.

APPEARANCES

For the Petitioner: David G. Schiller, SCHILLER & SCHILLER, PLLC

Raleigh, North Carolina, appearing

For the Respondent: Robert M. Curran, Assistant Attorney General

Raleigh, North Carolina, appearing

ISSUE

Whether Petitioner is eligible for disability retirement benefits pursuant to the North Carolina Statutes, and under Faulkenbury v. Teachers’ and State Employees’ Retirement System of the State of North Carolina, 345 N.C. 683, 483 S.E.2d 422 (1997).

STIPULATIONS OF FACT

per Joint Exhibit 1

1. The Petitioner, Martin Todd Oliver, became employed with the North Carolina Department of Agriculture and a contributing member of the Teachers’ and State Employees’ Retirement System on February 8, 1978.

2. The Petitioner terminated his position in the State System on February 26, 1990. He had 12 years of membership service in the Teachers’ and State Employees’ Retirement System at this time.

3. The Petitioner became employed with the Edgecombe County Sheriff’s Department and a contributing member of the Local Governmental Employees’ Retirement System on February 19, 1990.

4. The Respondent Retirement Systems Division received an Application of Member for Transfer Between Systems (Form 5TR) on April 3, 1990 requesting a transfer from the Teachers’ and State Employees’ Retirement System to the Local Governmental Employees’ Retirement System. The transfer was completed on May 29, 1990.

5. The Petitioner terminated his position with the Edgecombe Sheriff’s Department on November 22, 1994. He had 16 years and 10 months of membership service in the Local Governmental Employees’ Retirement System at this time, which included the 12 years of membership service transferred from the Teachers’ and State Employees’ Retirement System.

6. The Petitioner became employed with the North Carolina Department of Environment Health & Natural Resources, and again became a contributing member of the Teachers’ and State Employees’ Retirement System, on December 1, 1994.

7. The Respondent Retirement Systems Division received an Application of Member for Transfer Between Systems (Form 5TR) on December 6, 1994 requesting a transfer from the Local Governmental Employees’ Retirement System to the Teachers’ and State Employees’ Retirement System. The transfer was completed on February 28, 1995.

8. On June 2, 2003, the Retirement System received an Application for Retirement, which indicated that Petitioner was applying for a Disability retirement under the Faulkenbury case.

9. On July 18, 2003, the Retirement System notified the Petitioner by letter that he was not eligible to apply for disability retirement under the Faulkenbury Class Action.

10. On September 22, 2003 Petitioner’s Application for Retirement was cancelled for the reason he applied for long-term disability benefits under the provisions of the Disability Income Plan of North Carolina.

11. On October 7, 2003 the Medical Board reviewed Mr. Oliver’s case. He was approved for long-term with a beginning date of April 2002 and an end date of January 31, 2008. First payment was made in November 2003.

BASED UPON the above Stipulated Facts, the Undersigned makes the following:

CONCLUSIONS OF LAW

1. The N.C. Office of Administrative Hearings has jurisdiction over the parties and subject matter of this contested case pursuant to N.C.G.S. 150B-23, et. seq., and other applicable statutes, and there is no question as to misjoinder or nonjoinder.

2. Prior to January 1, 1988, a member of the Teachers’ and State Employees’ Retirement System who met the statutory qualifications could retire on a “disability retirement” pursuant to the provision of G.S. § 135-5(c). Effective January 1, 1988, the General Assembly adopted the Disability Income Plan, G.S. §§ 135-100, et seq., and amended § 135-5(c) to provide that the terms of § 135-5(c) “shall not be applicable to members in service on or after January 1, 1988.” Thereafter, members who met the disability qualifications were entitled to either short-term or long-term disability benefits, which benefits were calculated differently than the disability retirement benefits.

3. The North Carolina Supreme Court’s decision in Faulkenbury v. Teachers' & State Emples. Retirement Sys., 345 N.C. 683, 483 S.E.2d 422 (1997), determined that members of the Retirement System who were vested prior to the adoption of the Disability Income Plan (January 1, 1988) and who later became disabled would still be eligible for disability retirement benefits, notwithstanding the language of § 135-5(c) that its provisions “shall not be applicable to members in service on or after January 1, 1988.”

4. Though examining a determination of additional disability benefits owed, the case of Faulkenbury v. Teachers' & State Emples. Retirement Sys., 132 N.C.App.137, 510 S.E.2d 675 (1999), is informative as a review of sorts to Faulkenbury v. Teachers' & State Emples. Retirement Sys., 345 N.C. 683, 483 S.E.2d 422 (1997). Faulkenbury (1999) states, “This case involves four consolidated cases appealed from two decisions of the trial court on remedial questions following a judgment for the plaintiffs on liability. (Plaintiff Hailey's case was consolidated with the three original actions and certified as a class action on 28 July 1997). On 21 July 1995, the trial court entered judgment for the plaintiffs and concluded they were entitled to receive additional disability benefits. This judgment was affirmed by our Supreme Court in Faulkenbury v. Teachers' and State Employees' Ret. Sys. of North Carolina, 345 N.C. 683, 483 S.E.2d 422 (1997). These cases, certified as class actions, challenged the way disability benefits were calculated under the Teachers' and State Employees' Retirement System of North Carolina and the North Carolina Local Governmental Employees' Retirement System.”

5. Faulkenbury (1999) goes on to state, “the plaintiffs include all class members who had been employed for more than five years . . . and whose retirement and disability benefits were vested under either the Teachers' and State Employees' Retirement System of North Carolina or the North Carolina Local Governmental Employees' Retirement System.”

6. A Teachers’ and State Employees’ Retirement System member applying for disability benefits under Faulkenbury (1997) must vest not later than January 1, 1988. Petitioner’s rights vested in the Teachers’ and State Employees’ Retirement System prior to January 1, 1988. Petitioner’s right to make a claim for disability retirement benefits in the Teachers’ and State Employees’ Retirement System vested after five years of employment with the State of North Carolina, which was on February 8, 1983. Faulkenbury v. Teachers’ and State Employees’ Retirement System of the State of North Carolina, 345 N.C. 683, 483 S.E.2d 422 (1997).

7. Respondents argue that a “transfer between [retirement] systems is a transfer of service only and does not transfer other accrued rights.” In Respondents’ view, Petitioner did not transfer his vested rights when he transferred from the Teachers’ and State Employees’ Retirement System (TSERS) to the Local Governmental Employees’ Retirement System (LGERS).

8. Respondent cites G.S. § 128-34(b), which is the statutory provision pursuant to which the Petitioner transferred his credit from the TSERS to the LGERS, and provides in part as follows:

Any member of the Local Governmental Employees' Retirement System shall be entitled prior to his retirement to transfer to this Retirement System his credits for membership and prior service in the Teachers' and State Employees' Retirement System: Provided, the actual transfer of employment is made while he has an active account in the State System and such person shall request the State System to transfer his accumulated contributions, interest, and service credits to this Retirement System; provided further, the State System agrees to transfer to this Retirement System the amount of reserve held in the State System as the result of previous contributions of the employer on behalf of the transferring employee.

9. Respondent further cites G.S. § 135-18.1, which governs the transfer of retirement service from the Local into the State system, and provides in part as follows:

(a) . . . Any person who becomes a member of this Retirement System on or after July 1, 1951, shall be entitled prior to his retirement to transfer to this Retirement System his credits for membership and prior service in the local system: Provided, the actual transfer of employment is made while his account in the local system is active and such person shall request the local system to transfer his accumulated contributions, interest, and service credits to this Retirement System; provided further, with respect to any person who becomes a member of this Retirement System after July 1, 1969, the local system agrees to transfer to this Retirement System the amount of reserve held in the local system as a result of previous contributions of the employer on behalf of the transferring employee.

(b) The accumulated contributions withdrawn from the local system and deposited in this Retirement System shall be credited to such member's account in the annuity savings fund of this Retirement System and shall be deemed, for the purpose of computing any benefits subsequently payable from the annuity savings fund, to be regular contributions made on the date of such deposit.

10. Respondent lastly cites G.S. § 135-5(f) which states, “his membership in the System shall cease and, if he thereafter again becomes a member, no credit shall be allowed for any service previously rendered except as provided in G.S. 135-4, and such payment shall be in full and complete discharge of any rights in or to any benefits otherwise payable hereunder.”

11. The authorities cited above deal with such matters as, “credits for membership,” “accumulated contributions, interest, and service credits,” “previous contributions,” “computing any benefits subsequently payable from the annuity savings fund,” and “no credit shall be allowed for any service previously rendered.”

12. N.C. Gen. Stat. §135-28(b), however, states: “Any such member shall retain all the rights, credits and benefits obtaining to him under this Retirement System at the time of such transfer while he is a member of the local system and does not withdraw his contributions hereunder.. .” N.C. Gen. Stat. §135-28(b) (1983) (emphasis added).

13. In looking at the history of Faulkenbury (1997), and the “review” language latter cited in Faulkenbury (1999) where the court is looking at “the way disability benefits were calculated under the Teachers' and State Employees' Retirement System of North Carolina and the North Carolina Local Governmental Employees' Retirement System.:” the Undersigned is struck by the review of both systems and the logic of maintaining the rights of an eligible member as he or she may transfer uninterrupted between the two systems.

14. Petitioner’s retained rights included his vested rights under Faulkenbury. Respondents’ denial of Petitioner’s Faulkenbury disability benefits violates Chapter 135 of the General Statutes. Petitioner’s vested right (disability benefits) are and have been unlawfully impaired, diminished and violated as announced not only in Faulkenbury but also in Simpson v. North Carolina Local Governmental Retirement System, 88 N.C.App. 218, 363 S.E.2d 90 (1987), aff’d per curiam, 323 N.C. 362, 372 S.E.2d 559 (1988).

15. Respondents’ failure to pay Petitioner his appropriate disability retirement benefits constitutes a deprivation of property. Respondent’s interpretative application of Chapter 135 to the Petitioner is erroneous as a matter of law in that Chapter 135 does not require the cessation of retirement benefits and rights to a vested and retired member of the Teachers’ and State Employees’ Retirement System (such as the Petitioner) when the member begins working in the Local Government Employees’ Retirement Service. Those vested contractual rights may not be impaired, diminished or otherwise not honored. Petitioner’s contractual rights as a State employee were properly vested under Faulkenbury in the Teachers’ and State Employees’ Retirement System and as a continuous employee in the two systems they have not been lost.

BASED UPON the foregoing Stipiulated Facts and Conclusions of Law, the Undersigned makes the following:

DECISION

There is sufficient evidence in the record to properly and lawfully support the Conclusions of Law cited above. The Respondent’s action toward Petitioner, that is denial of eligibility for disability benefits under Faulkenbury v. Teachers' & State Emples. Retirement Sys., 345 N.C. 683, 483 S.E.2d 422 (1997), was in error. Petitioner is entitled to a recalculation by Respondent of the amount of Petitioner’s monthly disability retirement benefits to reflect Petitioner’s membership in Faulkenbury.

NOTICE

The agency making the final decision in this contested case shall adopt the Decision of the Administrative Law Judge unless the agency demonstrates that the Decision of the Administrative Law Judge is clearly contrary to the preponderance of the admissible evidence in the official record. The agency is required to give each party an opportunity to file exceptions to this Decision issued by the Undersigned, and to present written arguments to those in the agency who will make the final decision. N. C. Gen. Stat. § 150B-36(a).

In accordance with N.C. Gen. Stat. § 150B-36, the agency shall adopt each finding of fact contained in the Administrative Law Judge’s decision unless the finding is clearly contrary to the preponderance of the admissible evidence. For each finding of fact not adopted by the agency, the agency shall set forth separately and in detail the reasons for not adopting the finding of fact and the evidence in the record relied upon by the agency. Every finding of fact not specifically rejected as required by Chapter 150B shall be deemed accepted for purposes of judicial review. For each new finding of fact made by the agency that is not contained in the Administrative Law Judge’s decision, the agency shall set forth separately and in detail the evidence in the record relied upon by the agency establishing that the new finding of fact is supported by a preponderance of the evidence in the official record.

The agency that will make the final decision in this case is the Board of Trustees of the Teachers’ and State Employees’ Retirement System. The agency is required by N.C.G.S. 150B-36(b) to serve a copy of the final decision on all parties and to furnish a copy to the parties’ attorneys of record and to the Office of Administrative Hearings.

IT IS SO ORDERED.

This the 2nd day of February, 2006.

___________________________

Augustus B. Elkins II

Administrative Law Judge

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