Chris Graves and Chuck Gowdy of the Margate Beach Patrol.
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.
Using 2020 through 2022 data from municipal audits and actuarial reports, OSC estimated that 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, the OSC report said.
Sea Isle City Mayor Leonard Desiderio strongly denied that his town has underfunded its lifeguard pensions.
"What is important to note is that Sea Isle City’s pension program is not underfunded. Our city has over $1.2 million in the lifeguard pension trust fund, with an annual outlay of only about $20,000. Based on this, the fact is that Sea Isle City does not need to put more than it currently does into the fund annually," Desiderio said in a statement.
The comptroller’s report noted that towns can adopt a resolution that authorizes lesser annual contributions than are mandated by the lifeguard pension law. That action will take place in Sea Isle City in the near future, satisfying the needs of the state comptroller, Desiderio noted.
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 that 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,” Affanato said
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,” Affanato said.
Affanato said the comptroller also advised Longport 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 state comptroller reviewed municipal audits and actuarial reports using data from 2020-2022, which estimate six municipalities, Atlantic City, Brigantine, Longport, Margate, Sea Isle City and Ventnor City, have $37 million in pension liabilities, of which $34.2 million is unfunded.
In Cape May County, the city of Cape May, North Wildwood, Wildwood and Ocean City failed to obtain required actuarial calculations, so the costs of their programs are unknown, the OSC report said.
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 percent from lifeguard wages, failed to contribute to the pension fund, and didn’t use the highest three year’s salary to calculate pension amounts. Also in Ventnor, 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 by 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, Ventnor has contributed $40,000 to the pension system, which exceeds the required 4 percent, Stover 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,” Stover wrote in a 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 a news release.
There is currently no state-sponsored pension for seasonal workers, and municipal pensions are overly generous compared to the state’s plan, Walsh said.
Lifeguards contribute 4 percent of their salary to the system, compared to 7.5 percent 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.
