The N.C. Supreme Court heard oral arguments from attorneys Monday in State Treasurer Dale Folwell’s appeal of a decision relieving the Wilkes Board of Education from having to pay $590,694 toward the pension of Dr. Marty Hemric, who retired as Wilkes school superintendent in 2016.

Folwell appealed an N.C Court of Appeals decision saying the Teachers & State Employees Retirement System (T&SERS) Board of Trustees, which is part of his office, didn’t follow state rulemaking requirements before it adopted formulas for setting caps on T&SER funds for pensions of people making a little over $100,000 a year. The Supreme Court’s written decision is likely several months away.

Under a 2014 state law, a state retiree’s most recent employer must pay the difference if the retiree’s pension calculated under the formula exceeds what the person paid into T&SER while working. The formula considers years of employment, age at retirement, an annuity factor and more.

The formula determined that this amount for Hemric was $590,694, which the Wilkes school board paid but was later reimbursed.

The law was passed to keep high-earning employees from “spiking” their pensions by converting benefits to salaries as they near retirement. Most school and government pensions are based on a person’s four consecutive years of employment with the highest pay.

T&SERS went through the rulemaking process early this year and adopted formulas again on March 31 that left caps unchanged. The Wilkes and some other school boards were then billed for additional retirees whose pensions exceeded the caps. This included invoices of $120,355 for Anna Lankford and $10,470 for Lisa Joines sent to the Wilkes school board.

The $130,825 was paid, but a petition for judicial review filed in Wilkes Superior Court Friday on behalf of the Wilkes school board seeks reimbursement of this amount from T&SER based on the claim that the rulemaking process still wasn’t followed correctly by not including everything that must be considered, including alternatives and the impact on school districts.

Lankford was associate Wilkes school superintendent for curriculum and instruction when she retired July 1, 2019, at age 53 after 32 ½ years of employment with the Wilkes schools. Joines was principal at North Wilkes High School when she retired on July 1, 2018, at age 55 after 30 years of employment with the Wilkes schools.

Lankford annual salary in the four years before she retired was $56,496 for July to December 2015, $103,785 for 2016, $107,840 for 2017, $113,359 for 2018 and $67,996 for January to June 2019.

Joines' annual salary in the four years before she retired was $53,887 from July to December 2014, $105,057 for 2015, $104,013 for 2016, $109,302 for 2017 and $59,907 for January to June 2018.

Attorney Michael Crowell of Raleigh represents the Wilkes, Cabarrus, Johnston and Union county school boards, all with similar companion pension cases involving their retired superintendents heard by the Supreme Court Monday.

Crowell also represents the Wilkes school board in the latest challenge of Folwell and the T&SER board, as well as the Cabarrus and Wake county and Whiteville City school boards in similar companion cases. He said the Wilkes, Cabarrus and Wake and Whiteville cases will be transferred to Wake Superior Court to be heard.

“Even if the (T&SER) board of trustees’ rulemaking is upheld, we will be challenging the validity of the 2014 pension cap law itself. The result sought in all the cases is to have the court declare the pension cap invoices void,” said Crowell a governmental law attorney who was on staff at the University of North Carolina School of Government for almost a decade.

In the cases heard by the Supreme Court, Crowell contends that the T&SER board failed to follow the rulemaking requirements by not publishing notices, not holding a public hearing and not accepting public comments before it adopted the caps and formulas in 2014 and 2015. These requirements are in the N.C. Administrative Procedure Act.

Wake Superior Court Judge James E. Hardin Jr. concurred with this position in late May 2017 and it was upheld by the Court of Appeals in September 2018.

Folwell contends that because the legislature adopted the formulas for retirement caps by resolution and not by the rulemaking process, they aren’t subject to the rulemaking requirements.

The state treasurer’s office first informed Wilkes school officials in a letter dated Jan. 15, 2015, that Hemric’s pension pay might exceed the cap based on a formula that includes what Hemric and employers paid into his retirement account in his 30-year career in the public schools. The formula considers number of years of employment, age at retirement, an annuity factor and more.

The retirement system billed the Wilkes school board $590,694 for Hemric’s pension as result of the caps in April 2016.

Pension spiking isn’t illegal, but it results in a retiree receiving considerably more than was paid into the retiree’s pension fund, so the entire pension plan has to make up the difference.

Wilkes school officials insist that pension spiking didn’t occur with Hemric. They contend that Hemric’s situation resulted from the fact that he received considerably less pay most of his career because he worked earlier as a teacher, assistant principal or principal.

Crowell said Hemric’s salary didn’t increase enough while he was Wilkes school superintendent to make the cap apply to him.

Hemric was paid $196,999 in 2012-13, his first full fiscal year as Wilkes superintendent. It was $196,999 in fiscal 2013-14 and $229,613 in fiscal 2013-14. His pay in the eight months he worked in fiscal 2015-16 was $202,561, including a $26,636 annual leave payout. Hemric was 52 when he retired March 1, 2016.

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