Constitution Violated Reducing Retirement Health Benefits

GASTONIA, NC – On Friday, May 19, 2017, North Carolina Superior Court Judge Edwin Wilson, Jr. issued an order finding that the State of North Carolina had violated the North Carolina and U.S. Constitutions when it reduced retirement health benefits promised to retired state workers.  The Court found that the State had breached its contract with the retired employees, who had earned the benefits by working for the State long enough for those rights to vest. In September 2011, the General Assembly passed a statute requiring vested retirees to pay premiums for participation in the Standard 80/20 Health Plan that had always been promised and offered to retirees as premium-free.  A similar and earlier bill in 2011 had been vetoed by then Governor Beverly Perdue.

The case was filed in April of 2012. Judge Wilson denied the State’s motion to dismiss the claims, a decision which was upheld in 2014by the North Carolina Court of Appeals. Although the Defendants further appealed to the North Carolina Supreme Court, the Supreme Court dismissed that appeal.

In September of 2016, the Court certified the case as a class action that includes over 225,000 retirees.  Those retirees received postcards in the fall of 2016 informing them of their inclusion in the class. The class covers all retired members of the Teacher’s and State Employees Retirement System who vested into the retirement health benefits prior to September 1, 2011.

The Court’s Order requires the State Health Plan to provide the 80/20 health plan (or an equivalent plan) to all retirees without the charge of an additional premium.  The Order also requires the State to calculate the excess premiums paid by retirees from September 2011 to the present and pay those damages into a common fund to be administered by the Court.  The damages for the excess premiums are expected to exceed $100 million and have been increasing since 2011 due to increases in the size of the class and increasing premium rates.  After knowledge of the Court’s ruling, but prior to the Court’s filing of the Order, the State Health Plan increased the base premium rates for most non-Medicare retirees on the 80/20 Standard Plan, with the increase scheduled to begin January 1, 2018.   The Court has presently stayed execution of the order until the Defendants have an opportunity to appeal. On June 2, 2017, the State appealed the ruling.

Additional proceedings will continue at the trial court level to determine the amount of damages incurred by class members who opted for the less valuable, but premium-free 70/30 plan after the State began charging additional premiums for the Standard 80/20 Plan.

The case was initially filed by twenty-six retired State employees who formerly served in a wide range of positions within the North Carolina state government, including members of the judiciary (including a former Chief Justice of the North Carolina Supreme Court and a former North Carolina Court of Appeals Judge), presidents and superintendents of community colleges and local school systems, teachers, law enforcement personnel and administrators.

The lawsuit is captioned as I. Beverly Lake, et al. v. State Health Plan for Teachers and State Employees, et al. (Gaston: 12-CVS-1547).  The Plaintiffs are represented by Michael L. Carpenter and Christopher M. Whelchel of Gray, Layton, Kersh, Solomon, Furr, and Smith, P.A., Gary M. Jackson of The Law Offices of Jason E. Taylor, P.C., and Sam McGee of Tin Fulton Walker & Owen.

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