New Jersey lifeguard pension system under fire: $34 million shortfall, double dipping, and unequal burdens

Six New Jersey shore towns are facing a $34.2 million gap in their lifeguard pension funds, part of a decades-old system the state’s top watchdog says places a disproportionate financial burden on a small number of municipalities while providing unusually generous retirement benefits to seasonal workers.

The findings, published Wednesday by the Office of the State Comptroller, are based on a review of compliance with the state’s Lifeguard Pension Law, adopted in 1928, which requires certain “fourth-class” cities to provide defined pension benefits to lifeguards. The Office of the State Comptroller undertook the review of the shore cities after its 2022 audit of Brigantine found it had underfunded its lifeguard pension program by more than $4 million.

Six municipalities—Atlantic City, Brigantine, Longport Borough, Margate, Sea Isle City and Ventnor City—have pension liabilities totaling $37 million. Of that, $34.2 million is unfunded, according to the report.

In addition to those six towns, the Office of the State Comptroller reviewed other municipalities legally required to offer lifeguard pensions. It sent letters to Asbury Park and Long Branch, which never established lifeguard pension programs despite being subject to the law. Four others—Cape May, North Wildwood, Wildwood and Ocean City—failed to obtain required actuarial valuations, meaning the full extent of their pension liabilities is unknown.

The Lifeguard Pension Law applies only to municipalities defined under state law as “fourth-class cities,” meaning those cities bordering on the Atlantic Ocean that are seaside or summer resorts. Only 11 of approximately 40 oceanfront municipalities that hire lifeguards fall under that category. Longport Borough, although not a fourth-class city, created its own pension system in 1987.

Under the law, lifeguards become eligible for benefits at age 45 after 20 years of service. As of 2022, 206 people were receiving lifeguard pensions, with an average annual payout of $9,100. The highest reported pension paid to a retired lifeguard is $60,900 per year.

Officials pointed out in the report that state-administered pension programs do not allow participation by seasonal employees. The Lifeguard Pension Law offers what the report described as “an overly generous employee benefit” to seasonal workers, which “is inconsistent with the benefits provided by other retirement programs operated by the State, such as [the] Public Employees’ Retirement System.”

The Office of the State Comptroller found that 104 of the 206 lifeguard retirees drawing pensions also participate in another state-administered retirement plan.

The report also noted that all but one municipality, North Wildwood, retained pension contributions for lifeguards who didn’t meet the 20-year service threshold instead of returning them, effectively taxing “the labor of more junior lifeguards to pay for retiree benefits.”

Originally adopted in 1928 and modified in 1929 and 1936, the Lifeguard Pension Law requires cities to establish the lifeguard pension funds. Townships, boroughs and villages, even those with seasonal lifeguard staffs, are not covered by the statute, leading to unequal treatment of both municipalities and employees.

The Office of the State Comptroller is urging the Legislature to amend the law to eliminate the pension mandate for fourth-class cities going forward. Among its key recommendations are allowing a phased closure of the program while negotiating with current beneficiaries as needed, and requiring that cities return employee contributions to lifeguards who do not meet the minimum service time.

“The state needs to scrap the pension mandate,” said Acting State Comptroller Kevin Walsh. “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.”