If a former North Carolina state judge has already vested in his judicial pension before the General Assembly passed a law cutting benefits for state retirees who later become federal judges, can the State still cut his pension once he is appointed to the federal bench?

Plain-English summary

Senator Eric Reeves asked whether NCGS 135-72 could be applied to Judge Lacy Thornburg, the former North Carolina Superior Court judge who had retired from the state Consolidated Judicial Retirement System in 1983, later served as Attorney General, and in 1995 was appointed to the U.S. District Court for the Western District of North Carolina. Section 135-72(b), enacted in 1981, required that a state judicial retiree appointed to the federal bench have his Consolidated System benefits reduced to the amount funded only by his own contributions, effectively cutting his benefit by more than seven-eighths.

Chief Counsel John McArthur and Special Deputy AG Norma Harrell, for AG Easley, concluded the statute could not be constitutionally applied to Thornburg or to any other Consolidated System member or retiree who had already met the minimum age and service requirements for retirement on October 9, 1981 (the date 135-72 took effect).

The reasoning turned on the North Carolina Supreme Court's then-recent decision in Faulkenbury v. Teachers' and State Employees' Retirement System, 483 S.E.2d 422 (1997). Faulkenbury held that state retirement statutes create contracts: when the General Assembly enacts a law promising particular benefits in exchange for particular service, employees who accept jobs in reliance on those terms have "accepted" an "offer" that ripens into a contract. Once an employee fulfills the minimum service condition, the right vests, and the General Assembly cannot reduce the benefit retroactively without running into the Contract Clause of Article I, § 10 of the U.S. Constitution.

Thornburg was 51 and had 14 years of judicial service when NCGS 135-72 was enacted in 1981. He had already satisfied every retirement condition (the minimum age was 50 and the minimum service was zero until 1981, when the statute also added a 5-year minimum). Under Faulkenbury, his pension rights were already vested by October 9, 1981. The 1981 amendment that imposed the federal-bench cut could not be applied to him.

The Retirement Systems Division had been reducing his Consolidated benefits since 1995 under 135-72(b). The AG opinion told the State to stop and to restore full benefits. The opinion was framed broadly enough to apply to any future state judicial retiree who, like Thornburg, satisfied the minimum requirements before October 9, 1981. Anyone hired or vested afterward got the benefits as written, including the 135-72 reduction if appointed to the federal bench.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Consolidated Judicial Retirement System has been amended multiple times since 1997, including changes to benefit formulas and federal-bench provisions. The Faulkenbury doctrine has been refined and applied in later North Carolina cases. Anyone with a current question about state-judge pensions and federal appointments must read the current Chapter 135 statutes and the Faulkenbury line of cases.

Background and statutory framework

Before 1974, North Carolina had no formal retirement system for state judges. Superior Court judges had a benefit under NCGS 7A-51 based on service, but it was not part of a true defined-benefit pension system. The 1973 General Assembly created the Uniform Judicial Retirement System (1973 Sess. Laws ch. 640), effective January 1, 1974. Sitting judges, including Thornburg, were given service credit for time served before the system began. There was no minimum service requirement and no restriction tied to later federal appointments.

In 1981, the General Assembly tightened the system in two ways at once. It added a 5-year minimum service requirement under NCGS 135-57(a). And it enacted NCGS 135-72 to address the politically uncomfortable problem of state retirees double-dipping on the federal bench. Under 135-72(a), members of the Uniform System appointed to the federal bench became ineligible to receive benefits at all so long as they remained on the federal bench. Under 135-72(b), retirees appointed to the federal bench had their retirement allowance reduced so that the combination of federal salary and state retirement did not exceed the salary of the state judicial office they last held, with a floor at the amount funded by the retiree's own contributions.

Thornburg, born December 1929, retired in April 1983 at age 53 after 16 years on the Superior Court bench. He became Attorney General in January 1985, was required to switch to the Teachers' and State Employees' Retirement System for that service, and left office in January 1993. He drew his Consolidated System pension from 1993 until 1995, when he was appointed to the U.S. District Court for the Western District of North Carolina by President Clinton. At that point, 135-72(b) kicked in. The State reduced his Consolidated pension to about one-eighth of the previous amount. His TSERS benefit (from his Attorney General service) was not affected, because TSERS contained no equivalent clawback provision.

Faulkenbury was decided in early 1997. It involved disabled retirees and Disability Income Plan participants who had been receiving disability benefits computed under a less generous formula than the one in place when they were hired. The plaintiffs had at least 5 years of service before the formula changes; they became disabled later. The North Carolina Supreme Court held the formula changes were unconstitutional impairments of contract under Article I, § 10. The Court adopted a clean rule: once minimum service is satisfied, the benefit calculation in place at that time is contractually locked in. "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." 483 S.E.2d at 427-28.

Senator Reeves's question was timely. Faulkenbury had just been decided, and Thornburg (who had been an active state political figure and ex-Attorney General) was a high-profile test case for whether the holding extended beyond TSERS disability benefits to the Consolidated Judicial Retirement System's federal-bench rule. The AG's answer was yes: the Faulkenbury contract theory is not limited to disability benefits or to TSERS. It applies any time a state retirement statute promises a benefit in exchange for service. Thornburg had fulfilled the conditions before 135-72 was enacted; his right was vested; the 1981 amendment could not be applied to him.

Common questions

Did this opinion address whether 135-72 is constitutional on its face?

No. The opinion is narrower. It concludes that 135-72 cannot constitutionally be applied to a Consolidated System member or retiree who had already satisfied the minimum retirement conditions before October 9, 1981. The statute remains valid as to anyone who first met those conditions after that date. The General Assembly is free to set the terms going forward; it just cannot reduce benefits already locked in.

Did 135-72 apply only to Judge Thornburg?

He was the only identified person to whom it had been applied at the time of the opinion, but the AG framed the reasoning broadly. Any future state judicial retiree appointed to the federal bench would get the benefit of Faulkenbury protection if (and only if) he had fulfilled the minimum retirement conditions before October 9, 1981. For anyone hired or vested after that date, 135-72 stood as written.

How does this interact with federal retirement rules?

Federal judges have their own retirement provisions (the Article III judicial retirement system and the Judicial Survivors' Annuities System). The AG opinion does not address federal retirement law. The question was solely whether North Carolina could continue to reduce Thornburg's state-system pension; the answer was no, the state pension goes back to full, and federal pension issues are separate.

What if the General Assembly tried again to reduce vested judicial pensions?

Under Faulkenbury, any new statute attempting to reduce vested benefits would face the same Contract Clause challenge. The General Assembly can change the rules for future service, future hires, or non-vested employees. It cannot pull benefits from someone who has already met the conditions. Faulkenbury recharacterized retirement rules from a "gratuity" to a "contract," and that recharacterization is essentially permanent under current state-court doctrine.

Was Thornburg actually reimbursed for the reduced benefits?

The opinion does not say. The opinion's job was to advise the State on its constitutional obligations going forward. Whether Thornburg sought back-payment of the reduction from 1995 to mid-1997, and whether the State paid it, is not part of the opinion. The State would have had a hard time refusing once the AG concluded the reduction was unconstitutional.

Source

• Landing page: https://ncdoj.gov/opinions/receiving-judicial-retirement-benefits-while-serving-on-the-federal-bench/

Citations

• N.C. Gen. Stat. §§ 135-1 et seq., 128-21 et seq., 135-53(11), 135-55, 135-57(a), 135-72, 135-100 et seq., 7A-51
• 1973 N.C. Sess. Laws ch. 640
• 1981 N.C. Sess. Laws ch. 978
• 1983 N.C. Sess. Laws ch. 1031
• U.S. Const. art. I, § 10 (Contract Clause)
• Faulkenbury v. Teachers' and State Employees' Retirement System of North Carolina, 483 S.E.2d 422 (1997)

Original opinion text

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, 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