TRENTON – Six New Jersey municipalities have underfunded their lifeguard pension plans and face deficits of more than $34 million, the Office of the State Comptroller (OSC) announced this week. Five of them are in Atlantic County – Atlantic City, Brigantine, Longport, Margate and Ventnor.
Under a 1928 law, a “fourth-class” city, identified as one that borders the Atlantic Ocean and has a population less than 50,000, is required to provide a pension plan for their lifeguards.
However, in the lengthy report, the comptroller noted funding pensions is not a cost effective way of attracting and retaining seasoned lifeguards. The OSC is recommending the Legislature amend the law to eliminate pensions for new guards and renegotiate with current guards in the system.
Although Longport had a change of government since it was first incorporated more than 100 years ago, it is not an official fourth-class city. It established its pension program in 1987 and will now be tasked with deciding if it wants to continue the practice, Longport solicitor Michael Affanato advised the Board of Commissioners April 16.
“They are fairly confident that we are not required to have a lifeguard pension,” he said. “However, we are contractually obligated in a collective bargaining agreement and have an ordinance that established the pension plan,” he said.
The borough’s contract with lifeguards expires at the end of this year.
“You have to decide if you want to keep the pension moving forward, or approach the lifeguards with changing the pension system, which would involve revisions to the collective bargaining agreement…and make provisions with lifeguards who are already receiving the pension.”
There could be buyouts, or the commissioners could work with a pension specialist to come up with an alternate plan, such as a 401K or IRA.
“Ultimately, it’s a money issue,” he said.
Affanato said the comptroller also advised the borough it has a shortfall in funding. He said the borough could obtain an actuarial analysis to determine if it can meet its current financial obligations to the pension system; however, the cost of conducting an analysis is not included in the borough’s 2025 municipal budget.
The comptroller reviewed municipal audits and actuarial reports using data from 2020-2022, which estimate six municipalities, Atlantic City, Brigantine, Longport Borough, Margate, Sea Isle City, and Ventnor City, have $37 million in pension liabilities, of which $34.2 million is unfunded.
Cape May, North Wildwood, Wildwood, and Ocean City failed to obtain required actuarial calculations, so the costs of their programs are unknown.
According to the report, Longport created the pension without a statutory requirement to do so, the borough’s pension commission did not comply with state requirements, and the audit did not disclose the borough’s pension liability.
“The Borough of Longport will continue to find ways to track and document information regarding the Lifeguard Pension System more efficiently to ensure accurate and complete records,” Longport Administrator Patrick Dellane responded in a letter to the comptroller.
In Margate, the pension commission did not comply with state requirements and the audit failed to disclose the city’s liability.
According to correspondence from Margate CFO Lisa McLaughlin, the Margate Board of Commissioners has taken corrective action to establish a local pension board, and a subsequent audit disclosed the city’s liability.
In Ventnor, the city did not deduct the required 4% from lifeguard wages, failed to contribute to the fund, didn’t use the highest three year’s salary to calculate pension amounts, the local pension commission did not comply with state requirements, its audit did not disclose the city’s pension liability, and the city lacked adequate internal controls for tracking the pensions.
Ventnor CFO Amy Stover responded to the report stating the city would take corrective action on items outlined in the report. The Board of Commissioners will establish a new pension board.
Since the report period ended, the city has contributed $40,000 to the pension system, which exceeds the required 4%, she said. During the reporting period in question, the city contributed enough to cover its current retirees.
“The city will maintain its current practice of contributing at least 4% each year but reserves the right to suspend contributions when not needed,” she wrote in the letter to the comptroller.
She noted the city has since completed an actuarial report, which was submitted to the comptroller’s office.
Lifeguards who complete 20 years of service can start drawing benefits at age 45. The comptroller found that 206 people collect an average of $9,100 from the pension, with the highest draw paid out at $60,900 annually.
“The state needs to scrap the pension mandate. It saddles a small number of municipalities with a significant financial burden, and it just doesn’t make sense to give lifelong pensions for seasonal jobs,” Acting State Comptroller Kevin Walsh said in the release.
There is currently no state-sponsored pension for seasonal workers, and municipal pensions are overly generous compared to the state’s plan, he said.
Lifeguards contribute 4% of their salary to the system, compared to 7.5% for other state pensions, and lifeguard pensions include overtime pay, while other state plans do not.
Because lifeguard service is often short-lived, younger guards who work the beach during their college years are being tapped to pay for retiree benefits. Additionally, lifeguards who work on the beach when they have off from their teaching jobs are “double-dipping,” drawing pension payments from more than one public position, the report noted. State law generally prohibits most cases of double-dipping, but it does not prohibit combining a state pension with a local lifeguard pension.
The Comptroller’s Office started its investigation after Brigantine’s 2022 audit showed the city underfunded its lifeguard pension by $4 million.
The Office of the State Comptroller is an independent state agency that works to make governments more efficient, transparent and accountable. Tasked with examining government expenditures, the office conducts audits and investigations of government agencies throughout New Jersey, reviews government contracts, and works to detect and prevent fraud, waste and abuse in New Jersey Medicaid.
