New Jersey says hundreds improperly on public pensions

Reuters News
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Posted: Jul 17, 2012 11:00 AM
New Jersey says hundreds improperly on public pensions

(Reuters) - Towns across New Jersey have failed to cut hundreds of lawyers and other professionals from the public pension system despite a law passed five years ago requiring them to do so, according to the results of a probe released on Tuesday.

Some of the 202 independent contractors identified in the report are signed up to receive benefits through multiple towns at once, according to New Jersey Comptroller Matthew Boxer's report. Without action, the improper enrollments could eventually cost the state $1.9 million annually.

The problem is "extensive," Boxer said in a statement. "Local governments across the state have not done nearly enough to ensure that only eligible employees receive pension benefits."

One lawyer, who was not named in the report, is on track to receive pensions from six different municipalities, a practice called "tacking."

In some cases, local governments decided to keep their attorney enrolled in the pension plan based on that same attorney's legal advice, the report said.

"Government officials should not be relying on pension eligibility advice from the very attorney whose eligibility is at issue," Boxer said. "That just flies in the face of common sense."

The investigation covered just 58 local municipalities. Not included in the probe were 515 municipalities and 597 school districts. If those were also reviewed, it "could yield hundreds of additional professionals inappropriately enrolled" in the pension system, the report said.

Boxer said he will send the 202 names to the state's Division of Pension and Benefits for review and possible removal of the recipients. He did not make any criminal allegations.

New Jersey has been plagued by a range of pension fraud and abuse in years past. In 2005, the state formed a benefits review task force to dig into the way the system functioned and to recommend cost controls.

Two years later, the state had new laws governing pension eligibility, including a provision that was supposed to strip attorneys, doctors, engineers and other professionals who were working as independent contractors from New Jersey's Public Employees' Retirement System (PERS).

Those already receiving pension credit for their time under the old law were supposed to stop accruing that credit as of 2008.

Yet one attorney, for example, makes $191,654 as the director of the legal department for the Borough of Fairview, and also makes $50,000 as legal counsel for the Guttenberg Board of Education. He is enrolled in PERS for both part-time positions and has accrued at least 22 years of pension credits, the report said.

If the lawyer retired now, he would get about $97,200 a year in pension benefits. If he was cut off in 2008 as he should have been under the new law, his annual benefits would drop by nearly $30,000 to $67,776 annually, the report found.

Most others mentioned in the report, none of whom were named, made much less from their municipal work even if they worked for several entities at once.

(Reporting By Hilary Russ; Editing by Kenneth Barry)