North Carolina Court Affirms Pension Rule Dismissal

The state appellate court ruled that administrative bodies cannot decide constitutional challenges to pension laws.

Updated on Oct. 29, 2026 in Retirement Planning

North Carolina Court Affirms Pension Rule Dismissal

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The North Carolina Court of Appeals has affirmed the dismissal of a petition challenging state retirement system rules. The court determined that the Office of Administrative Hearings lacks the authority to resolve constitutional claims regarding contractual rights.

Why it matters

This decision clarifies the scope of administrative oversight in North Carolina, establishing that state agencies cannot rule on the constitutionality of legislative amendments that impact retirement benefits. It underscores the limitations placed on administrative agencies when participants challenge state law changes.

The revised state law mandates a 5-year limit for repurchasing retirement service credit. This rule remains in effect despite the petitioner seeking to repurchase 7.3 years of service credit under the prior statutory framework.

The players

North Carolina Court of Appeals

This is the intermediate appellate court in the North Carolina judicial system that reviews decisions made by lower courts and state agencies.

Office of Administrative Hearings

This independent state agency conducts quasi-judicial hearings to resolve disputes between individuals and state government agencies.

Richard Lemaster

He is a retired teacher and the petitioner who challenged the state's revised retirement service credit repurchase formula.

The details

The court concluded that the Office of Administrative Hearings only possesses powers expressly granted by statute, which does not include the authority to adjudicate constitutional challenges. The lawsuit originated from a retired teacher who sought to challenge statutory changes that repealed previous repurchase options.

Richard Lemaster joined the retirement system in 1996.
The petitioner returned to teaching in 2011.
State officials provided initial retirement service credit repurchase estimates between 2018 and 2019.
The General Assembly repealed the former retirement repurchase statute in 2021.
The revised retirement repurchase law became effective in 2022.

Market Dynamics

This case follows the implementation of the 2022 North Carolina retirement service-credit repurchase statute, which established new limits on how educators can bolster their pension eligibility. The ruling solidifies the legal framework supporting these legislative changes within the state pension system.

Current and retired state employees must now adhere to the 5-year limit when calculating potential service credit repurchases. This ruling confirms that challenges to these benefit limitations must be directed through the court system rather than administrative hearings.

The takeaway

Retirement plan participants should be aware that administrative agencies are restricted in their ability to address broad constitutional arguments regarding benefit statutes. Legal disputes involving the impairment of contract rights typically require intervention from judicial courts instead.