Bill S 1091-A / A 2239-A was passed by the Assembly on May 24, 2021. This bill has now been passed by both the Senate and the Assembly, and now awaits the Governor's signature.
If the Governor signs this bill into law, the maximum years of service credit that can be earned in a volunteer firefighter LOSAP here in New York State will be increased from 40 to 50 years. Since plans could have been adopted as early as 1990, including the 5-year buyback there are some participants that may be earning their 37th year of service in 2021.
For a sponsor to amend its LOSAP, it must adopt a resolution to amend the plan and then have that amendment approved by mandatory referendum (i.e., public vote). The statute stipulates that the sponsor does not have to increase to the full 50 years, but could increase it in increments.
For a Fire District that would like to hold this referendum on December 14, 2021, the timing of when the Governor signs this bill will be critical. The Governor signed the COVID-points bill 21 days after it was passed by both houses. However, the bill to increase the defined contribution plan service award to $1,200 was not signed until November 8th, or about 4.5 months after it was passed by the Legislature. Since the resolution must be adopted roughly 30 days before December 14, 2021, any significant delay in the Governor signing the bill into law could create some timing issues. A District could include provisionary language in the resolution, stating the amendment is contingent on the Governor signing the bill into law. Please contact your attorney for guidance on this.
When (hopefully) the Governor signs the bill into law, we'll post another update.
At the end of March, we alerted readers to a bill that would amend Sections 218 and 219 of the New York State General Municipal Law to increase the maximum years of service credit that can be earned by a participant from 40 to 50 years. You can read that post here.
The bill is S1091A in the Senate and A2239A in the Assembly. On April 28, 2021, the Senate approved its version of the bill. It was then delivered to the Assembly and referred to the Local Government Committee.
Given the activity on these bills, including recent amendments to them, we believe it is very likely that that the Assembly will also pass its version of the bill, paving the way for it to be delivered to the Governor for signature into law.
The bill would specifically allow a LOSAP sponsor to extend the maximum years of service credit for up to an additional ten years (i.e., from 40 to 50 years). Additionally, it stipulates that a sponsor could implement that extension in increments or all at once. Finally, the bill clarifies that to amend the program, the sponsor must adopt a resolution and then seek voter approval through a mandatory referendum.
The cost impact of increasing the maximum years of service credit will depend on the type of program (DB or DC) and, for DB plans, the actuarial methodology used to determine the contributions.
For a defined contribution (DC) plan, there is no immediate cost increase as a result of allowing participants to earn the additional ten years. Instead, the sponsor is simply extending the current cost of the program. Another way to think about it is that the sponsor is postponing a potential cost savings, since costs would decrease once participants reached the maximum years of service credit and could no longer earn a contribution.
For a defined benefit (DB) plan, if the actuary is using a funding method that projects benefits into the future, then there could be an immediate cost increase for extending the service cap. If the actuary is not using a projection method, then there likely will be no immediate cost increase. Similar to the DC plan, the sponsor is instead extending the current cost for another ten years. We suggest contacting your actuary for more details.
As we follow the progress of these bills, we will post updates here.