(Raleigh, N.C.) – In an opinion released last week, a three-judge panel of the North Carolina Court of Appeals unanimously held that the Retirement Systems Division (RSD) of the Department of State Treasurer acted properly when it reduced state disability benefits to a former state employee in order to recoup overpayments of those benefits due to mandatory Social Security disability offsets.
The former employee, Stephanie Trejo, challenged the reduction in benefits in an administrative proceeding at the Office of Administrative Hearings, and an Administrative Law Judge (ALJ) issued summary judgment in favor of the state. However, the Dare County Superior Court reversed the ALJ's decision and entered judgment in favor of Ms. Trejo. The Appellate Court decision overturns the Superior Court's ruling.
“We just want to follow the law," said North Carolina State Treasurer Dale R. Folwell, CPA. “We have a fiduciary duty to the members of the plan to ensure that that we are properly offsetting not only disability overpayments, but any payments that someone received that they are not entitled to."
The state approved Ms. Trejo's application in 2009 and awarded her disability benefits, including retroactive payments for benefits that accrued since 2004. In 2013, the state notified Ms. Trejo that it had mistakenly failed to apply a mandatory offset based on the Social Security benefits to which she might be entitled. That offset resulted in a reduction of state long-term disability payments to Ms. Trejo.
The Court also held that the state's reduction of long-term disability benefits to recoup overpayments and apply the offset going forward is not a proceeding in a court of justice and, therefore, is not the commencement of an action subject to the statute of limitations.
“We are very pleased with the ruling," said Sam Hayes, General Counsel for the North Carolina Department of State Treasurer. “The Solicitor General's office did a great job arguing the case on behalf of taxpayers. Since the ruling was unanimous, we hope this will bring an end to litigation on the matter."
The Department of State Treasurer's Retirement Systems Division manages the processing and administration of all retirement benefits, including disability, for North Carolina state government, local government, law enforcement, judicial, and legislative employees, as well as fire and rescue workers, and all of their applicable beneficiaries. More information can be found at www.myncretirement.com.