Carla Shuford thought a call from the state treasurer’s office telling her to look for an important letter was a hoax, but the reality hit her the next day with a notice that the state had been putting too much in her disability checks for more than 10 years, and now it planned to collect.
She is one of 60 former state employees who have to return money because audits found mistakes in their disability payments.
An audit of Shuford’s state Disability Income Plan benefits turned up more than $19,000 in overpayments since 2006, according to the letter she received in June. The state had not subtracted money from her disability checks to account for the years when cost-of-living increases boosted her Social Security payments. To make the adjustments and recoup the overpayments in five years, the state cut its disability payments to the former UNC-Chapel Hill secretary by more than half.
Shuford, 74, whose left leg was amputated when she was 15, said she didn’t know how she would have handled such a sharp reduction in income. She uses crutches when she leaves home, and thinks it would be hard to rejoin the workforce.
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She was able to negotiate a schedule that stretches the repayment period to 10 years rather than five. “They agreed to 10 years, but it was like pulling teeth,” Shuford said.
The episode has left her with a sour feeling, especially since she found out she’s one of 60 people who face repayments.
“You’re picking on the most vulnerable people,” she said. “You know they don’t have the wherewithal to fight.”
State Treasurer Dale Folwell said the office is required by law to get back money when it pays out too much.
“We’re sorry for this lady’s disability,” he said. “This is something our administration didn’t do. We discovered it and now we have the responsibility to fix it.”
Disability payment audits started under former state Treasurer Janet Cowell, he said.
Folwell, who was elected last year, said he was not sure why the disability payments were not reduced as required when Social Security payments increased, but suspects that the oversight came as changes were being made to the disability income plan, and the need to make corrections automatically was overlooked.
The June 16 letter Shuford received, which she keeps in an envelope labeled “nasty letter,” says an administrative error caused Social Security cost of living not to be applied after 2005. The treasurer’s job was held by Democrat Richard Moore over two terms between 2001 and 2009 and then by Cowell, also a Democrat, for the next two terms before Republican Folwell took office this year. Cowell and Moore could not be reached.
Shuford called state Rep. Verla Insko for help. Insko, a Chapel Hill Democrat, said she drafted Shuford’s letters to the department asking for longer repayment terms, and accompanied her to a meeting at the treasurer’s office. The state needs to get the money back, she said, but state agencies should have ombudsmen to help people address such problems. Legislators step into that role through their constituent service, she said, but “not all people know to call their legislators.”
The treasurer’s office is seeking repayment of about $1 million from 60 people, including one person who went to court and got a three-year payment plan.
Shuford, who grew up in western North Carolina, was diagnosed with bone cancer as a teenager and had her left leg amputated at the hip. Shuford said she wasn’t expected to survive, but completed high school and moved to Chapel Hill in 1965. She said she worked as a secretary at UNC-Chapel Hill until the late 1980s, when she suffered a deep depression that she traces back to her childhood illness. She could not return to work.
After a year on state disability, the rules required her to apply for Social Security disability, and she was approved for those benefits.
State law doesn’t spell out how long former employees have to repay the state, but the treasurer’s office wants to get the money back before they die.
“At some point, when you look at repayments, if we are the fiduciaries of this plan and we’re trying to follow the law, you have to look at the probability of getting the money back based on life expectancies,” Folwell said. Some people intentionally take benefits they haven’t earned, Folwell said. In those cases, he’s not inclined to give them 10 years to repay the state.
Other overpaid disabled workers who received notices like Shuford’s were able to negotiate longer repayment periods, his office said.
The state’s long-term disability benefits are 65 percent of the worker’s salary minus reductions. Payments are reduced by other benefits such as worker’s compensation or Social Security. The state disability benefit started in 1987 and is available at no cost to people who participate in the state pension plan or the UNC optional retirement program. The state has older disability plans that are no longer accepting new participants, and at least one of those required employee contributions.
Overpayments aren’t a new problem. A state audit report from June 2013 flagged disability overpayments as a problem and said the treasurer’s office should do more to avoid them.
Ardis Watkins, a lobbyist with the State Employees Association of North Carolina, said she’s been hearing about overpayments for 25 years.
“What strikes me is that so much time had gone by without anyone catching the errors,” she said.
The goal is to have reasonable repayment periods when errors are found, Watkins said.
“I’m hopeful moving forward we won’t see these types of errors,” said Watkins, who sees more emphasis in state government on accountability and following up on audits.
“I’m sad for the people affected,” she said. “I’m happy that the treasurer’s office is working with them.”
Shuford was surprised with the news from the treasurer’s office because she saw her disability checks getting smaller with Social Security increases. “I’m very careful with my figures,” she said.
The treasurer’s office sent her six pages detailing the overages.
In July, the treasurer’s office adjusted her monthly payment from $1,141 to $896 to account for Shuford’s $1,300 monthly Social Security income, then deducted $328 to start the repayments, leaving her with a $568 state check.
“It might not seem like a lot, but when you have $2,000 and they take out $300, that adds up,” she said.
Repaying the state over 10 years rather than five brings the monthly reduction to about $161, leaving her with a monthly state check of about $735.
“I’m in that level where I’m not on the street, but I have to be very, very, very careful,” Shuford said. “I don’t mind doing that. I’ve lived that way a long time.”