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July 18, 2012

The Office of the State Comptroller looked at the pension rolls of 58 municipalities and school systems and found 202 pension enrollees that were improperly credited as employees and given pension credits, despite the fact that they were independent contractors.

The 202 enrollees included 176 attorneys, 21 engineers, four healthcare professionals, and one auditor. These enrollees could be paid approximately $1.9 million a year plus about $307,000 in state health benefits. State Comptroller Matthew Boxer has referred the names of the 202 enrollees to the Division of Pensions and Benefits and asked that they be removed from the rolls.

The comptroller’s office says this is a critical problem, since it estimates that a review of the remaining 515 municipalities and 597 school districts not included in the investigation would likely yield hundreds of other improperly enrolled persons costing the state millions of additional dollars.

A 2007 state law, according to the report, made clear that individuals are ineligible for pension benefits if they met the Internal Revenue Services multifactor definition of an independent contractor or obtained their position through public bidding. The 2007 law required all public entities to determine whether they had non-employees on the pension rolls. Most of the municipalities who were found to be violating this law said they believed the individuals were “grandfathered” in to the system. The law contains no such exception, according to Boxer.

Among the many towns mentioned in the report were the Township of Belleville, City of New Brunswick, City of Wildwood, Borough of Kenilworth, Township of Union, Borough of Avon by the Sea, Borough of Wanaque, and the City of Garfield.

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