June 17, 1997
Honorable Eric Reeves, Senator North Carolina General Assembly 2111 Legislative Building Raleigh, N.C. 27601-2808
Re: Advisory Opinion; N.C.G.S. § 135-72; Receiving Judicial Retirement Benefits While
Serving On The Federal Bench
Dear Senator Reeves:
You have inquired about the constitutionality of N.C.G.S. § 135-72, which prohibits a member of the federal judiciary from receiving full retirement benefits from the North Carolina Consolidated Judicial Retirement System ("Consolidated System"). In particular, you asked about the constitutionality of applying it to a former state judge retired from the Consolidated System who was subsequently appointed to the federal bench. For reasons explained below, it is our opinion that it cannot constitutionally be applied to members or retirees of the Consolidated System who were over 50 and had five years’ service with the Consolidated System prior to the enactment of
N.C.G.S. § 135-72.
At present, Judge Lacy Thornburg is the only identified person to whom § 135-72 has been applied. However, should other members or retirees be appointed to the federal bench in the future, it would be equally unconstitutional to apply § 135-72 to them if they, like Judge Thornburg n1, had five years or more of service in the Consolidated System and were over 50 prior to the enactment of § 135-72.
n1 Judge Thornburg was born December 20, 1929. He served as a Superior Court Judge from 1967 until early 1983.
The Consolidated System is a successor to the Uniform Judicial Retirement System ("Uniform System"), which was created by Section 1, Chapter 640 of the 1973 Session Laws. Prior to the Uniform System, there was no formal retirement system for North Carolina judges, but there were retirement benefits payable under N.C.G.S. § 7A-51 to Superior Court Judges who had sufficient service. When the Uniform System was created effective January 1, 1974, judges then in office, including Superior Court Judges, received service credit for their time served as judges prior to the existence of the Uniform System. Judge Thornburg became a Superior Court Judge several years before the creation of the Uniform System and became a contributing member from its inception. The original statutes governing the Uniform System did not include any provisions concerning the effect of appointment to the federal bench on the retirement benefits of members or retirees of the Uniform System. Nor did they require any minimum amount of service for a participating judge to retire if he was over 50 years of age. In 1981, in a single bill, the General Assembly amended N.C.G.S. § 135-57(a) to require at least five years of service before a judge could retire and enacted N.C.G.S. § 135-72 to limit or prohibit retirement benefits to judges appointed to the federal bench. 1981 N.C. Sess. Laws, ch. 978. Specifically, N.C.G.S. § 135-72(a) made members of the Uniform System who were appointed to the federal bench ineligible for benefits from the Uniform System so long as they remained on the federal bench. ("Members" are judges or justices who have not retired or withdrawn their contributions. See
N.C.G.S. §§ 135-53(11), 135-55.) Under § 135-72(b), retirees from the Uniform System who were appointed to the federal bench had their retirement allowances reduced so the combination of federal salary and retirement benefits from the Uniform System did not exceed the salary for the offices they last held as North Carolina judges or justices. However, the Uniform System benefits paid to a retired North Carolina judge who was then appointed to the federal bench could not "be reduced below the amount of his annuity resulting from his accumulated contributions." At the time that legislation was enacted and became effective, Judge Thornburg was over fifty years of age, the minimum age for a judge to retire unless he had twenty-four (24) years of service, and had well over five years of service.
In April, 1983, Judge Thornburg retired and began drawing service retirement benefits from the Uniform System. Effective January 1, 1985, the parallel retirement systems for district attorneys and clerks of court were merged into the Uniform System to form the Consolidated System. See 1983 Sess. Laws, ch. 1031 (1984 Reg. Sess.). The merger required no substantive changes in the benefit provisions for judges and retired judges. The only change to N.C.G.S. § 135-72 was the substitution of the phrase "as a judicial officer" for the phrase "as a justice, judge or magistrate" so that the section would apply to district attorneys and clerks of court as well as to justices, judges, or magistrates. In January, 1985, Judge Thornburg became Attorney General. Beginning in July, 1985, he was required to participate in the Teachers’ and State Employees’ Retirement System and was ineligible to receive benefits from the Consolidated System. Upon his departure from the Attorney General’s office, his Consolidated System retirement benefits were reinstated in January, 1993, and he also began drawing a benefit from the Teachers’ and State Employees’ Retirement System for his service as Attorney General.
In 1995, Judge Thornburg was appointed to the position of United States District Court Judge for the Western District of North Carolina. At that time, his benefits from the Consolidated System were reduced to his annuity, the amount funded by his own contributions, pursuant to § 135-72(b). The reduction caused his benefits from the Consolidated System to fall to less than one-eighth of the full amount he had been receiving. Because Article 1 of Chapter 135 of the General Statutes, governing the Teachers’ and State Employees’ Retirement System, contains no provision comparable to § 135-72, Judge Thornburg’s benefits from that system for his service as Attorney General were not affected.
The question is whether N.C.G.S. § 135-72 can be constitutionally applied to Judge Thornburg, who was over age 50 and had substantially more than five years’ service credit with the Uniform System when § 135-72 was enacted. Based on a recent decision of the North Carolina Supreme Court in Faulkenbury v. Teachers’ and State Employees’ Retirement System of North Carolina,
N.C. , 483 S.E.2d 422 (1997) ("Faulkenbury"), we have concluded that Judge Thornburg had contractual rights in the benefit provisions of the Uniform and Consolidated Systems and his benefit from the Consolidated System could not constitutionally be reduced because of his appointment to, and service on, the federal bench. In Faulkenbury, disabled retirees and persons receiving benefits from the Disability Income Plan of North Carolina (N.C.G.S. §§ 135-100 et seq.), sued the Teachers’ and State Employees’ Retirement System (N.C.G.S. §§ 135-1 et seq.) and the Local Governmental Employees’ Retirement System (N.C.G.S. §§ 128-21 et seq.), claiming that it was unconstitutional to apply to them certain changes in the way disability benefits were calculated when they had five years service prior to the enactment of those changes and the changes resulted in their receiving smaller disability benefits than they would have if the contested changes had not been made. The Supreme Court agreed, holding that the members of the retirement systems "accepted" "offers" which "created a contract" when they began their employment. Faulkenbury, 483 S.E.2d at 426-27.
We believe that when the General Assembly enacted laws which provided for certain benefits to those persons who were to be employed by the state and local governments and who fulfilled certain conditions, this could reasonably be considered by those persons as offers by the state or local government to guarantee the benefits if those persons fulfilled the conditions. When they did so, the contract was formed.
Faulkenbury, 483 S.E.2d at 427 Nor does it matter whether all the conditions have been fulfilled at the time of the disputed change in the retirement laws. The plaintiffs in Faulkenbury were not disabled at the time of the changes about which they complained. In fact, they became disabled and began receiving disability benefits as little as fifteen months later and as much as ten years later. Rejecting the defendants’ arguments that the Faulkenbury plaintiffs could not have vested or contractual rights in the disability benefits until they became disabled, the Supreme Court explained that the minimum amount of service for the benefits was the critical factor.
We believe a better analysis is that, pursuant to the plaintiffs’ contracts, they were promised that if they worked for five years, they would receive certain benefits if they became disabled. The plaintiffs fulfilled this condition. At that time, the plaintiffs’ rights to benefits in case they were disabled became vested. The defendants could not then reduce the benefits.
Faulkenbury, 483 S.E.2d at 427-28. Accordingly, the Supreme Court held that the defendants had unconstitutionally impaired the obligation of contracts under Article X, Section 1 of the United States Constitution and that the plaintiffs were entitled to the higher benefits payable under the former disability retirement statutes.
Judge Thornburg was over the minimum retirement age and had more than fulfilled the minimum amount of service for his retirement benefits at the time the General Assembly enacted N.C.G.S. § 135-72, on October 9, 1981, effective the same day. Under Faulkenbury, he had a contractual right in his retirement benefits once he had fulfilled the conditions for service retirement. The General Assembly could not thereafter reduce his benefits based on whether he served as a United States Judge after his retirement from the Uniform System, later the Consolidated System. We therefore conclude that Judge Thornburg is entitled to receive his retirement benefits from the Consolidated System without any reduction based on his service as a judge of the United States District Court.
This opinion is based on Judge Thornburg’s contractual rights and would apply equally to any member of the Consolidated System who may be appointed to the federal bench in the future if he or she had fulfilled the minimum requirements for retirement prior to enactment of N.C.G.S. § 135-72.
Sincerely,
John R. McArthur Chief Counsel
Norma S. Harrell Special Deputy Attorney General