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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 today. Six other towns “likely face liabilities in the millions, if not tens of millions,” OSC’s report said.

Under a 1928 law, “fourth-class” cities are required to provide a generous pension plan for their lifeguards. Only 11 of about 40 municipalities bordering the Atlantic Ocean that hire lifeguards are considered fourth-class cities, but OSC found one other town, Longport Borough, created a pension program in 1987 even though it is not a fourth-class city.

Using 2020 through 2022 data from municipal audits and actuarial reports, OSC estimated that 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. Asbury Park and Long Branch never established lifeguard pension programs, despite being required to do so. Cape May, North Wildwood, Wildwood, and Ocean City failed to obtain required actuarial calculations, so the costs of their programs are unknown.

Lifeguards who complete 20 years of service can start drawing benefits at age 45. OSC found that 206 people draw lifeguard pensions, with an average annual draw of $9,100. The highest pension paid to a retired lifeguard is $60,900 annually, the report said.

“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,” said Acting State Comptroller Kevin Walsh.

No state-administered pension programs offer pensions for seasonal workers.

The lifeguard pension program also provides overly generous benefits compared to state-administered programs. While employees in one of the largest pension programs are required to contribute 7.5 percent of their pay and can retire at 65, the lifeguards are required to contribute just 4 percent of their pay and can retire at 45. Six of the ten lifeguard pension programs also include overtime and other additional pay to calculate retiree benefits, while the state programs do not.

Few lifeguards work long enough to qualify for a pension. But while state retirement programs require funds to be returned to employees if they stop working toward their pension, only North Wildwood returns the money to former employees. The other cities keep the contributions made by lifeguards to fund retiree pensions. “This effectively taxes the labor of more junior lifeguards to pay for retiree benefits,” OSC’s report said.

OSC also found that the lifeguard pension programs permit double dipping—drawing pensions and benefits from more than one public position. Without examining out-of-state public pension programs, OSC found that of the 206 retired lifeguards currently receiving pensions, 104 participate in a state-administered pension program, most of them a teachers’ pension program. State law generally prohibits most cases of double dipping, but it does not prohibit combining a state pension with a local lifeguard pension.

OSC undertook this comprehensive look at fourth-class cities after its 2022 audit of Brigantine found it had underfunded its lifeguard pension program by more than $4 million. On average, OSC found, lifeguard pension programs cost ten municipalities about $1.8 million annually. Requiring lifelong pension payments is not a cost-efficient way to attract and retain lifeguards, OSC’s report said. OSC recommended that the Legislature amend the lifeguard pension law to eliminate or reduce lifeguard benefits for new hires and negotiate with current beneficiaries as needed.

Read the report and the individual audits and letters OSC sent to the 12 towns.

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To report government fraud, waste, mismanagement, or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.