N.J. Investigation Weeds Out Ineligible PERS Participants

July 18, 2012 (PLANSPONSOR.com) – An investigation has found hundreds of individuals in the New Jersey Public Employees Retirement System (PERS) who are ineligible to participate.

According to a report from the office of the state comptroller (OSC), despite the clear mandate of a 2007 law, an overwhelming majority of local units failed to remove independent contractors from PERS. Twenty-one of the surveyed local units maintained the PERS enrollment of a total of 34 professionals who were retained via a professional services agreement (PSC) after the termination date of their prior PSC, despite the statutory prohibition.    

As to those professionals not retained by a PSC, not one of the surveyed units properly performed and documented the analysis required to support the continued enrollment of their professionals who were not removed from PERS.  

In total, OSC identified 202 professionals enrolled in PERS after 2008 who are retained through a PSC or are otherwise “unlikely,” as per IRS guidelines, to be properly considered a government employee due to their concurrent private professional practice. Most of the 202 still are enrolled in PERS, and a significant number of them have “tacked” together multiple dubious enrollments.  OSC is forwarding to the state’s division of pensions and benefits (DPB) the names of each of these 202 individuals.      

The 202 enrollees are providing services to at least 159 different local units (134 municipalities and 25 school districts).    

Based on its findings, OSC estimates that a review of the remaining 515 municipalities and 597 school districts not included in its survey could yield hundreds of additional professionals inappropriately enrolled in PERS. Considering there are also hundreds of independent local authorities and commissions in New Jersey, a review of those entities could yield many more PERS enrollees who actually are not government employees.    

“The continued PERS enrollment of ineligible professionals, despite the efforts to curb this abuse, has the potential to cost the state millions of dollars in inappropriate future pension benefits,” OCS noted in its report.  

The report is here.