retroactive change to State Retirement plan illegal?

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Matt Y.
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retroactive change to State Retirement plan illegal?

Post by Matt Y. »

I am trying to learn if a recent retroactive change in benefit eligibility at the NC State Retirement system is legal.

During May 2014, I had enough years of State employment where I was eligible for the state to pay all of the cost for my individual coverage under the State Health Plan 70/30 or Medicare Advantage Base Plan as a retiree. I have copies of the plan documents that spell this out along with e-mail correspondence with the plan administrator confirming I had achieved this eligibility milestone.

In 2017 my eligibility (and that of others) was effected by a new State Guidance Document that changed the definition of when someone was "first-hired". This new definition excluded employment periods of anyone who had received a return of their retirement contributions for periods worked prior to 2006. So, while a refund of contributions had no impact on determining ones "first-hired" date prior to 2017, after 2017 this new definition effectively re-set ones “first-hired” date to when they were rehired - which for me is now 2009 since I had taken a return of contribution.

During 2007 I planned to temporarily withdraw my State retirement plan contributions for the time I worked prior to 2006. I had left work on good terms and was planning to work for the State again at a later date. The following year, during 2009, I was quickly rehired and have remained employed since that time. I have since returned the withdrawn contributions with interest.

At the time of my 2007 withdrawal, I knew the plan rules at that time specified that my withdrawal would not in any way impact my “first-hired” date. Now, the 2017 Guidance Document changed this to retroactively disqualify my eligibility because of the 2007 withdrawal. This new change moves my eligibility for the state to pay all of the cost for my individual health coverage to 2029 where under the previous rules, I was already eligible as of May 2014!

Unless corrected, I feel this 2017 change irreparably damages the 2007 terms of my employment benefits since it does not grandfather my eligibility. Is this retroactive rescinding of benefits legal? If not, what is my recourse? If a lawyer, what kind and should I involve others in similar situation? It feel unjust, like they have changed the rules/ moved the goal posts in the middle of the game.

I have pressed my case with the plan administrator who indicated my concerns will be under review with the folks at the State Treasurer - along with a number of others who are unhappily in the same situation. I have been told the State treasurer’s office will get back with me. In the meantime, I am reaching out in case anyone has direct experience or information that might be helpful.

Thank you,

Matt Y.
drawpoker
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Re: retroactive change to State Retirement plan illegal?

Post by drawpoker »

Illegal? Probably not

Here in Maryland, the retired state employees are fuming because it was announced their Rx drug plan is being eliminated and everyone was told they had so many days to sign up with a Medicare Part D PDP.

Their retiree drug coverage program had been "promised" to them as one of their retiree plan benefits.
So much for promises. :( :( :( And no group, lawyers or others, have come forward to challenge the legality.
Last edited by drawpoker on Mon Sep 17, 2018 4:00 pm, edited 1 time in total.
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Re: retroactive change to State Retirement plan illegal?

Post by jebmke »

drawpoker wrote: Mon Sep 17, 2018 3:54 pm Illegal? Probably not

Here in Maryland, the retired state employees are fuming because it was announced their Rx drug plan is being eliminated and everyone was told they had so many days to sign up with a Medicare Part D PDP.

Their retiree drug coverage program had been "promised" to them as one of their retiree plan benefits.
So much for promises. :( :( :(
Even in the private sector, retiree health benefits are not protected the same as a pension.
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Re: retroactive change to State Retirement plan illegal?

Post by NYC_Guy »

This is often a matter of state constitutional law. Some states have constitutional provisions that protect state government pensions (and have state supreme courts that have interpreted those provisions quite broadly). There are no federal protections here (unless the state were discriminating on the basis of gender, race or another protected class). I have no idea what NC law is on this. You would need to consult a NC lawyer with appropriate experience to get a definitive answer.
Last edited by NYC_Guy on Mon Sep 17, 2018 4:06 pm, edited 1 time in total.
drawpoker
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Re: retroactive change to State Retirement plan illegal?

Post by drawpoker »

Yeah, but is a "state government pension" considered the same as "retiree health benefits" :?:
123
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Re: retroactive change to State Retirement plan illegal?

Post by 123 »

Are you in a bargaining unit/position that is represented by a union? There is strength in numbers. If you are represented by a union I would raise the issue through them since others could be impacted as well. When a union is involved it's called "bargaining" because both sides have skin in the game, when an individual employee asks for something the employer often treats it as "begging".
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Matt Y.
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Re: retroactive change to State Retirement plan illegal?

Post by Matt Y. »

123 wrote: Mon Sep 17, 2018 4:10 pm Are you in a bargaining unit/position that is represented by a union? There is strength in numbers. If you are represented by a union I would raise the issue through them since others could be impacted as well. When a union is involved it's called "bargaining" because both sides have skin in the game, when an individual employee asks for something the employer often treats it as "begging".
Unfortunately there is no union at this employer.
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dm200
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Re: retroactive change to State Retirement plan illegal?

Post by dm200 »

jebmke wrote: Mon Sep 17, 2018 4:00 pm
drawpoker wrote: Mon Sep 17, 2018 3:54 pm Illegal? Probably not
Here in Maryland, the retired state employees are fuming because it was announced their Rx drug plan is being eliminated and everyone was told they had so many days to sign up with a Medicare Part D PDP.
Their retiree drug coverage program had been "promised" to them as one of their retiree plan benefits.
So much for promises. :( :( :(
Even in the private sector, retiree health benefits are not protected the same as a pension.
Yes! Some (perhaps many/most) Megacorps that formerly provided excellent health benefits to retirees - even after Medicare age - have stopped such benefits or severely reduced them - with no "grandfathering" at all. I believe this is especially true for those eligible for medicare.
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Re: retroactive change to State Retirement plan illegal?

Post by Nate79 »

It's not like it wasn't review by legal teams already but you could hire your own lawyer to represent yourself.
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Re: retroactive change to State Retirement plan illegal?

Post by SoAnyway »

Apparently, this isn't the first time the NC Treasurer has changed the rules in the middle of the game. From this article:
In 2012, retired teachers and employees sued the state in Gaston County Superior Court, contending they’d been promised free health insurance when hired. The pledge was violated a year earlier when the State Health Plan started charging them as much as $105 a month. The case became a class action involving 220,000 retirees, and a judge agreed: The state broke its contractual promise, retirees were entitled to free insurance, and the state must pay back the premiums. After various appeals, the case is headed for the N.C. Supreme Court. An estimated $100 million in refunds could be at stake.
OP, I'd consult a lawyer. You might even start with the firm representing the plaintiffs in the above lawsuit, particularly if there are many others in your situation.
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Matt Y.
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Re: retroactive change to State Retirement plan illegal?

Post by Matt Y. »

SoAnyway:
It appears you and the highly relevant article are spot-on as this additional article indicates NC State lost the case: https://www.newsobserver.com/opinion/ed ... 31404.html
The state lost, and now is looking at $100 million in damages. The judge ruled that retirees had a contractual right to get the benefits without a premium, something that should have been obvious to legislators who pushed the idea. One day, it may be necessary for the state to adjust health plan benefits for future employees, but this action was premature and, as it’s turned out, legally tenuous.... But legislators – many of them inexperienced in the finer points of regulations and benefits regarding state employees – need to move with caution when it comes to something like changing a valued benefit, one that was indeed a promise when those workers signed on. This action was precipitous and now will be costly to all taxpayers.
This would indicate it is worth the effort to pursue my case.
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Re: retroactive change to State Retirement plan illegal?

Post by drawpoker »

Yes and no.

The state appealed and is awaiting a decision whether the NC Supreme Court will hear the appeal directly (bypassing the NC Court of Appeals) This was supposed to have happened in the spring of this year, so apparently there has been a delay.
Here is the most up to date info from the law firm representing the plaintiffs.

http://lakeclasscase.com/case-summary/
SoAnyway
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Re: retroactive change to State Retirement plan illegal?

Post by SoAnyway »

drawpoker wrote: Mon Sep 17, 2018 10:06 pm Yes and no.

The state appealed and is awaiting a decision whether the NC Supreme Court will hear the appeal directly (bypassing the NC Court of Appeals) This was supposed to have happened in the spring of this year, so apparently there has been a delay.
Here is the most up to date info from the law firm representing the plaintiffs.

http://lakeclasscase.com/case-summary/
^^ Drawpoker beat me to the punch. ; ) As indicated in the articles you and I linked, the state lost in the lower court. But with >$100MM in past premiums that the state would have to pay back to the retirees, the state is (of course) appealing the decision. The state has every incentive to keep this thing locked up in the court system as long as possible, so it will be a while before a final decision is rendered.
Matt Y. wrote: Mon Sep 17, 2018 9:58 pmThis would indicate it is worth the effort to pursue my case.
Well, maybe/maybe not, but it's certainly worth talking to a lawyer who knows a whole lot more than you or I do about NC law on the matter. (I know nothing.) :) Drawpoker's link provides the names of the firms that are representing the plaintiffs in that case. Bear in mind that it's possible that the change in benefits in that case wasn't done legally, but the change in your case was. For example, there might be legal reasons that it's not ok to change the promised benefits to those who (unlike you, had no break in service), but it's perfectly ok to change the definition of when one was "first hired". Hence, my advice to consult an attorney knowledgeable in such matters. Good luck!

EDIT: I've never stepped foot in North Carolina, so I really do know nothing but I do read the news: OP, I hope you and yours are all safe amid the Florence issues.
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celia
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Re: retroactive change to State Retirement plan illegal?

Post by celia »

Matt Y. wrote: Mon Sep 17, 2018 3:51 pm ...During May 2014, I had enough years of State employment where I was eligible for the state to pay all of the cost for my individual coverage under the State Health Plan 70/30 or Medicare Advantage Base Plan as a retiree. I have copies of the plan documents that spell this out along with e-mail correspondence with the plan administrator confirming I had achieved this eligibility milestone.
If you happened to pay into Medicare while employed with the state or had other employment where you paid in for at least 10(??) years, you would probably be eligible for a Medicare Advantage Plan (through Medicare) without paying premiums (other than the standard $134/mo that most beneficiaries pay).
In 2017 my eligibility (and that of others) was effected by a new State Guidance Document that changed the definition of when someone was "first-hired". This new definition excluded employment periods of anyone who had received a return of their retirement contributions for periods worked prior to 2006. So, while a refund of contributions had no impact on determining ones "first-hired" date prior to 2017, after 2017 this new definition effectively re-set ones “first-hired” date to when they were rehired - which for me is now 2009 since I had taken a return of contribution.

During 2007 I planned to temporarily withdraw my State retirement plan contributions for the time I worked prior to 2006. I had left work on good terms and was planning to work for the State again at a later date. The following year, during 2009, I was quickly rehired and have remained employed since that time. I have since returned the withdrawn contributions with interest.
The first paragraph (regarding definition of "first-hired") seems fair to me since the retirement plan no longer had your contributions for years worked before 2006. Since the state's plan was holding your post-2006 contributions and those who had the same pay rate who started in 2006, shouldn't you get the same retirement benefits? However, once you re-paid the state your withdrawn contributions with interest, it is like it was never withdrawn, giving you increased (original) retirement benefits. I assume this is what your argument to the state Treasurer's office is about.
At the time of my 2007 withdrawal, I knew the plan rules at that time specified that my withdrawal would not in any way impact my “first-hired” date. Now, the 2017 Guidance Document changed this to retroactively disqualify my eligibility because of the 2007 withdrawal. This new change moves my eligibility for the state to pay all of the cost for my individual health coverage to 2029 where under the previous rules, I was already eligible as of May 2014!
In my personal opinion, it appears to be a state oversight that allowed retirees to keep their "first-hired" date even when they withdrew their contributions. I liken this to the SS situation that was in effect 10 years ago, where retirees could start receiving benefits at 62, invest them, then return all the benefits (while keeping the growth) and re-file for higher age 70 benefits. Once too many people took advantage of something that Congress probably didn't intend, it was corrected.
Unless corrected, I feel this 2017 change irreparably damages the 2007 terms of my employment benefits since it does not grandfather my eligibility. Is this retroactive rescinding of benefits legal? If not, what is my recourse? If a lawyer, what kind and should I involve others in similar situation? It feel unjust, like they have changed the rules/ moved the goal posts in the middle of the game.
I think that YOU made a change in your employment status by withdrawing your contributions. It is likely that since too many people were doing it and it was hurting the growth of the assets overall, it would be fair to prevent so much money from leaving.
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Matt Y.
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Re: retroactive change to State Retirement plan illegal?

Post by Matt Y. »

SoAnyway wrote: Mon Sep 17, 2018 10:30 pm
drawpoker wrote: Mon Sep 17, 2018 10:06 pm Yes and no.

The state appealed and is awaiting a decision whether the NC Supreme Court will hear the appeal directly (bypassing the NC Court of Appeals) This was supposed to have happened in the spring of this year, so apparently there has been a delay.
Here is the most up to date info from the law firm representing the plaintiffs.

http://lakeclasscase.com/case-summary/
^^ Drawpoker beat me to the punch. ; ) As indicated in the articles you and I linked, the state lost in the lower court. But with >$100MM in past premiums that the state would have to pay back to the retirees, the state is (of course) appealing the decision. The state has every incentive to keep this thing locked up in the court system as long as possible, so it will be a while before a final decision is rendered.
Matt Y. wrote: Mon Sep 17, 2018 9:58 pmThis would indicate it is worth the effort to pursue my case.
Well, maybe/maybe not, but it's certainly worth talking to a lawyer who knows a whole lot more than you or I do about NC law on the matter. (I know nothing.) :) Drawpoker's link provides the names of the firms that are representing the plaintiffs in that case. Bear in mind that it's possible that the change in benefits in that case wasn't done legally, but the change in your case was. For example, there might be legal reasons that it's not ok to change the promised benefits to those who (unlike you, had no break in service), but it's perfectly ok to change the definition of when one was "first hired". Hence, my advice to consult an attorney knowledgeable in such matters. Good luck!

EDIT: I've never stepped foot in North Carolina, so I really do know nothing but I do read the news: OP, I hope you and yours are all safe amid the Florence issues.
SoAnyway and Drawpoker:

Thanks for noting that the case is still in the appeal process and for sharing the link from the law firm representing the plaintiffs in this case - I will contact them if I do not receive a satisfactory answer to my request from the State Treasurer’s Office. I agree, the law firm should no doubt have much deeper insight into the legality of the 2017 change as it relates to my situation.

Matt Y.
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Re: retroactive change to State Retirement plan illegal?

Post by MnD »

drawpoker wrote: Mon Sep 17, 2018 4:05 pm Yeah, but is a "state government pension" considered the same as "retiree health benefits" :?:
Bingo and the answer is often no. Health insurance, COLA's and other retirement goodies are often legally separated from the core vested pension obligation. It's also generally a bad idea to withdraw employee contributions when you are planning to come back.

The good news is that there is a coordinated legal case regarding this that is yielding results.
You might contact lead plaintiff attorneys and see if there is any way to support this effort but I'd say the matter is in the courts hand.
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Re: retroactive change to State Retirement plan illegal?

Post by drawpoker »

Matt Y. wrote: Tue Sep 18, 2018 8:00 pm
.....still in the appeal process and for sharing the link from the law firm representing the plaintiffs in this case - I will contact them if I do not receive a satisfactory answer to my request from the State Treasurer’s Office. I agree, the law firm should no doubt have much deeper insight into the legality of the 2017 change as it relates to my situation.
Did you catch the significance of the name "Lake" in the title of this case?

Yup, that is I. Beverly Lake Jr. The former chief judge of the NC Supreme Court.

You couldn't ask for a bigger heavyweight than that for a lead plaintiff in a lawsuit. Makes me think this is one the state (defendant) is ultimately going to lose when the plaintiffs have their day in court.
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Matt Y.
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Re: retroactive change to State Retirement plan illegal?

Post by Matt Y. »

drawpoker wrote: Tue Sep 18, 2018 9:20 pm
Matt Y. wrote: Tue Sep 18, 2018 8:00 pm
.....still in the appeal process and for sharing the link from the law firm representing the plaintiffs in this case - I will contact them if I do not receive a satisfactory answer to my request from the State Treasurer’s Office. I agree, the law firm should no doubt have much deeper insight into the legality of the 2017 change as it relates to my situation.
Did you catch the significance of the name "Lake" in the title of this case?

Yup, that is I. Beverly Lake Jr. The former chief judge of the NC Supreme Court.

You couldn't ask for a bigger heavyweight than that for a lead plaintiff in a lawsuit. Makes me think this is one the state (defendant) is ultimately going to lose when the plaintiffs have their day in court.
I did catch the lead plantif's name - I. Beverly Lake Jr.. In my younger days, I was neighbors with his son Lee Lake. Very small world.
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