The North Carolina Court of Appeals ruled on Wednesday against a teacher who attempted to use an outdated state formula to buy back more than seven years of retirement credit, affirming that the administrative court where he filed his claim did not have the legal authority to decide the matter.
The case involves Richard D. Lemaster, Jr., who began his career as a North Carolina teacher in 1996 and joined the Teachers’ and State Employees’ Retirement System (TSERS). When he later left his teaching position, Lemaster withdrew his contributions, which ended his system membership and wiped out 7.3 years of retirement service credit. He returned to teaching in 2011 and rejoined the state pension system.
According to court documents, Lemaster spoke with a retirement system employee in 2018 about purchasing his past years of service. The employee advised him that most workers wait until they are close to retirement to execute a buyback, warning that the cost would rise by 6.5% each year. Lemaster chose to wait, reasoning that private investments would bring a better financial return in the meantime. The state provided him with buyback estimates of $33,790.66 in 2018 and $36,012.05 in 2019.
In June 2021, the North Carolina General Assembly changed the law, repealing the old calculation formula. The new rules, which took effect in July 2022, altered how the buyback cost was calculated and capped retirement service purchases at a maximum of five years.
When Lemaster requested a new calculation in 2023, the state informed him he could only purchase five years of credit at a total cost of $51,660.83. After the Department of State Treasurer confirmed this decision in a final agency action, Lemaster filed a contested-case petition with the Office of Administrative Hearings (OAH). He alleged a breach of contract and argued that the state unconstitutionally impaired his vested rights.
An administrative law judge dismissed Lemaster’s petition, ruling that the OAH lacked subject-matter jurisdiction over the claims. A Union County Superior Court judge later affirmed that dismissal.
The Court of Appeals upheld those lower decisions on Wednesday. Writing for a unanimous three-judge panel, Judge Valerie Zachary noted that administrative agencies like the OAH only have the powers explicitly given to them by lawmakers.
The OAH “is a creature of the statute creating it and has only those powers expressly granted to it or those powers included by necessary implication from the legislative grant of authority,” Zachary wrote.
Because Lemaster’s case required deciding whether the legislature’s new law unconstitutionally altered his contract rights, the court ruled the administrative court was the wrong venue.
“The question of constitutionality of a statute is for the judicial branch,” Zachary wrote, quoting previous state Supreme Court precedent, and adding that “it is the province of the judiciary to make constitutional determinations.”
Judges Chris Griffin and Michael J. Freeman concurred with the decision, which leaves the superior court’s dismissal intact. Lemaster was represented by David G. Schiller of Schiller & Schiller, PLLC, while Assistant Attorney General Natalia Isenberg represented the Department of State Treasurer.
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