Report: Hundreds of non-public workers improperly enrolled for state pensions

By: - November 10, 2021 10:00 am

The state has a backlogged list of 241 professional service providers improperly enrolled for public pensions, the comptroller says. (Courtesy of the Comptroller’s office)

More than 240 independent contractors are improperly enrolled as public employees in New Jersey’s pension system, and the state Treasury Department is too understaffed and powerless to clear its nine-year backlog of investigating such cases, the State Comptroller said Wednesday in a report.

The Treasury Department’s Division of Pensions and Benefits has saved taxpayers about $59 million by removing or reducing pension benefits for ineligible workers since state lawmakers in 2007 ordered closer scrutiny to uncover and deter pension abuse, according to the report.

But the division could be saving far more if it had enough investigators to clear its backlogged list of 241 professional service providers improperly enrolled for public pensions — 60 of whom first landed on the division’s radar in 2012, according to the report. Professional service providers are independent contractors who perform work for public entities on a contractual or part-time basis but are not public employees, like a private attorney hired by a town to help with a lawsuit.

The division’s investigators also have been stymied by uncooperative public employers who have delayed or resisted responding to requests for information, the report notes.

New Jersey State Comptroller Kevin D. Walsh (Courtesy of the Comptroller’s office)

“Allowing independent contractors to draw down pension benefits drains New Jersey’s pension system and requires taxpayers to pay a pension to someone who never should have been in the pension system to begin with,” Acting State Comptroller Kevin D. Walsh said.

Wednesday’s report comes nine years after another report from the comptroller’s office found most municipalities and school districts statewide were breaking state law by allowing independent contractors to earn pension credits and enroll for a public pension multiple times, a practice known as “tacking” that was common when one independent contractor worked in multiple municipalities.

That report prompted the state to create a Pension Fraud and Abuse Unit.

“We appreciate the Comptroller’s thorough review of the matter and the recommendations they have put forth to further empower the Division of Pension and Benefits in their continued mission to prevent fraud and abuses,” said Treasury spokeswoman Jennifer Sciortino. “We will continue to work with the division and the Legislature, as necessary, to ensure that the Pension Fraud and Abuse Unit has the resources necessary to investigate unauthorized benefits and protect taxpayer dollars.”

The lingering problems Walsh’s office uncovered in this week’s report stem in part from resistance by municipalities to provide information, which paralyzes the division’s ability to root out abuse, the report says. One Central Jersey municipality — not named in the report — took three years to comply with investigators’ requests for information.

Legislators should give the pension division the authority to compel compliance, either through subpoena power or by referring the resisting municipality’s officials for violations of the Local Government Ethics Law, Walsh wrote.

The pension division also needs more money to beef up staffing, he said. It has just three investigators now assigned to find and fix pension abuses across the state’s 565 municipalities and 600 public school districts. That doesn’t include the untold number of public authorities, commissions, fire districts, and other independent entities statewide.

There is more money to be saved for taxpayers in this area, Walsh said.

“The state will do a better job protecting pension funds if we find ways to clear the backlog faster and if the Legislature gives (the division) the powers it needs to more aggressively identify abuses of the pension fund,” he said.

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Dana DiFilippo
Dana DiFilippo

Dana DiFilippo comes to the New Jersey Monitor from WHYY, Philadelphia’s NPR station, and the Philadelphia Daily News, a paper known for exposing corruption and holding public officials accountable. Prior to that, she worked at newspapers in Cincinnati, Pittsburgh, and suburban Philadelphia and has freelanced for various local and national magazines, newspapers and websites. She lives in Central Jersey with her husband, a photojournalist, and their two children.

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