WILMINGTON — Many assume that teachers and administrators who are found guilty of criminal acts or who are fired for egregious wrongdoing will lose their retirement benefits — a common theme in theories of why certain employees are ‘allowed to retire’ — but in reality things are far more complicated, and even those fired and convicted of felonies can continue to receive some benefits.
It’s worth a closer look at the issue, in no small part because — in the wake of the conviction of former teacher Michael Earl Kelly and the resignation of Deputy Superintendent Dr. Rick Holliday — the New Hanover County School system is now under scrutiny by the State Bureau of Investigation (SBI) for alleged failure to report child abuse and obstruction of justice. The school board has also hired a law firm to conduct its own investigation.
Local leaders have pledged to hold accountable staff and administration that are found to have committed wrongdoing, but it turns out that is unlikely to include employees’ retirement benefits.
North Carolina’s retirement plan
School employees receive state-sponsored retirement plans through the North Carolina Department of the State Treasurer. Employees pay in six percent of their pre-tax paycheck; every dollar paid in is matched by $1.80 from the local employer and $5.40 in dividends from invested contributions. Monthly retirement payments depend on how long an employee worked and what their salary was in the last four years of service. After five years of “credible service,” employees are deemed “vested,” meaning they can receive benefits.
Whether an employee resigns or retires, whether they are let go or fired with cause, retirement isn’t affected. Under specific circumstances, especially for newer hires, employees do forfeit retirement payments, and in very extreme cases the state will actually take action to recover payments already received — but these situations are very rare.
To forfeit retirement benefits, employees must be convicted of a state or federal felony that is directly related to their job, according to the Department of the State Treasurer (DST). An employee who, for example, was arrested on felony drug charges outside of work could be fired by the district, but would still be eligible for all state retirement benefits (thus, employees who are convicted of felonies committed after leaving the school district aren’t at risk of forfeiture).
In the case of Michael Earl Kelly, the former New Hanover County teacher and convicted sex offender who was sentenced to 17 to 31 years after pleading guilty to dozens of felonies last month, the case seems clear cut. Kelly was convicted of crimes he committed, including those on school grounds, directly related to his role as a teacher.
Still, even employees who are convicted of felonies – as in the Kelly case – are often entitled to retirement benefits.
Felons are still eligible for some benefits
That’s because, under state law, employees who are vested as of December 1, 2012, are only prohibited from collecting retirement benefits earned after that date. Their service before that date still counts.
According to the state’s retirement program, “If you were not vested as of December 1, 2012, and are convicted of a state or federal felony directly related to your employment while in service under TSERS, you are prohibited from receiving any retirement benefit other than a return of your contributions plus interest. If you were vested as of December 1, 2012, you are prohibited from receiving any retirement benefit for service rendered after December 1, 2012, other than a return of your contributions plus interest for the period of service after December 1, 2012. “
That means that Kelly receives credit for his service to the school system for his full-time employment between 1993 and the end of 2012 – nearly twenty years of teaching. At the age of 50, which Kelly reached while being held in the New Hanover County detention center, he became eligible to receive those benefits — although at a reduced level. He will also receive a refund on his retirement contributions – plus interest – earned after the 2012 cutoff.
Kelly could also wait until he is 65 (though he would likely still be incarcerated at that time), and begin pulling full retirement benefits.
The current investigation
Neither the New Hanover County Sheriff’s Office or the State Bureau of Investigation have named individual suspects in their investigation into failure to report or obstruction of justice – although multiple witnesses and victims have since come forward to say they took incidents of teacher misconduct to specific board members and administrators, including Deputy Superintendent Dr. Rick Holliday. (For reference: Holliday, whose retirement benefits would be based on the state portion of his salary, around $100,000, and nearly 40 years of service to the district, could be $60,000 or higher.)
While law enforcement hasn’t named any suspects, since the SBI investigation was tied to allegations dating back to 2006, it stands to reason many involved are long-serving administrative or leadership staff. So, could principals or administrators lose their pension if found guilty of wrongdoing?
Probably not.
First, many of the allegations involve misdemeanors, including the ‘failure to report’ allegations based on state law that requires certain school officials to report suspicion of child abuse. (Further, as a misdemeanor, failure to report has a statute of limitations – usually two years.)
On the other hand, obstruction of justice – an allegation that was mentioned for the first time when District Attorney Ben David announced he and Sheriff Ed McMahon had requested the SBI take over the investigation into NHCS – can either a misdemeanor or a felony. The state law covering obstruction of justice doesn’t refer to a single crime, but a variety of crimes, including making false reports, interfering with a witness, altering evidence, and others. Felony obstruction of justice charges would likely be more difficult to prove — however they don’t carry a statute of limitations.
It’s worth noting that many longtime members of the district’s leadership and administration have served for many years, and would have reached salary credible service levels by December 1, 2012, sufficient to generate significant retirement benefits — even if they were found guilty of one or more felony charges.
Drastic measures
In some cases, the DST takes direct action on retirement benefits forfeitures — as in the cases of Laura Riddick, the former Wake County register of deeds who embezzled nearly $1 million from her office between 2000 and 2010. Riddick resigned as the SBI began investigating — and began pulling retirement benefits.
Riddick was found guilty of six counts of felony embezzlement in 2018 and sentenced to prison — this caused her retirement benefits (from a state-employee system related to the school-employee system) to be recalculated to a lower amount. The DST sent her a bill, ordering her to repay the extra amount she’d earned.
One drastic measure that’s not on the table is a request from local schools or government bodies to forfeit an employees retirement benefits. According to DST, no such mechanism exists; benefits decisions rest solely with the state.
Send comments and tips to Benjamin Schachtman at ben@localvoicemedia.com, @pcdben on Twitter, and (910) 538-2001
