On September 26th, the City Council of Ocean City, New Jersey unanimously approved a resolution asking the New Jersey State Legislature to abolish the statutory requirement that seasonal lifeguards be provided pensions.
Ocean City established a Lifeguard Pension Plan governed by the Ocean City Lifeguard Pension Board in 1988 due to state law requiring local governments do so. Under the policy, lifeguards who have served over twenty years, and are age 45, are entitled to half of their final average pay in pension. Under the Ocean City plan, llifeguards contribute 4% of their gross salary towards their city-operated pension fund.
According to a recent audit, which prompted the City Council to consider the resolution, lifeguard pension costs have been rising in recent years. In 2010, the city was required to pay $122,643, and just two years later, required pension payments rose to $156,530. Given that Ocean City lifeguards only have to contribute 4% of their salary towards making those payments, their combined annual contributions towards covering those costs have remained around $50,000 a year. Meanwhile, Ocean City taxpayers have had to contribute $50,000, $75,000, and $100,000 towards the lifeguard pension plan in 2010, 2011, and 2012, respectively. In other words, city taxpayer contributions towards a pension plan of questionable value doubled within just a few years.
To make matters worse, the combined city and employee contributions have fallen short of the required annual pension payments, as much as $22,000 short in 2010. As a consequence, the “Trust Fund Reserve for Lifeguard Pensions” has dwindled in recent years to roughly $93,000.
Currently, there are 28 retired Ocean City lifeguards who, combined, are receiving over $160,000 in annual pension benefits. As these lifeguards have only been part-time or seasonal employees, their pension perks are quite small, so small that one has to wonder how it ever seemed like a reasonable or sensible use of taxpayer money to promise pensions to them in the first place.
The Ocean City resolution declares that “it is in the best interest of the taxpayers of the City to end the practice of paying pensions to seasonal Lifeguards and hereby requests that State and Assembly of the State of New Jersey initiate and pass legislation to abolish said Statutory requirements.” Who can argue with that?
Stay in Touch with Our Pension Experts
Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.