Today, August 20, 2021, Governor Cuomo signed bill S1091a / A2239a into law.

Chapter 400 of the Laws of 2021 extend the maximum years of service credit that can be earned in a volunteer firefighter LOSAP from 40 years to 50 years.

The bill amends both Section 218 (defined contribution plans) and Section 219 (defined benefit plans) to include the same language, which is as follows:

The governing board of a political subdivision may extend the maximum number of years of service for which a participant may receive a contribution for up  to  an  additional  ten years,  to a maximum of fifty years, and such increases in the number of years may be added in multiple increments or in a single action,  pursuant  to  the  adoption  of the required resolution or resolutions of the governing board, receiving  the  affirmative  vote  of  at  least  sixty percent  of  the  governing  board of the political subdivision, and the approval of any mandatory referendum or referenda authorizing the extension of benefits under the program by eligible voters within such  political subdivision.

Interestingly, the language states that a political subdivision can extend the maximum years of service for which a participant may receive a contribution an additional ten years. That wording is more applicable to a defined contribution plan, where a participant receives a contribution into an account for each year of 50 points earned, rather than a defined benefit plan where a participant earns a monthly benefit instead.

However, the intention seems clear - that a LOSAP can be amended to extend the maximum years of service credit from 40 to 50 years, and that such extension requires voter approval at a mandatory referendum.

Yesterday, Monday August 9th, bill A2239a was delivered to the Governor. This bill would extend the maximum years of service credit that can be earned in a volunteer firefighter service award program from 40 to 50 years. Therefore, this also extends the number of years in which a participating firefighter can accrue benefits by another 10 years.

The timetable for signature or veto by the Governor is different depending on when a bill is delivered. If a bill is delivered while the Legislature is in session, the Governor has 10 days (excluding Sundays) to sign the bill into law, or veto it. If no action is taken, then the bill automatically becomes law.

However, if the Legislature is not in session, which is the current situation, the Governor has 30 days in which to sign the bill into law. If no action is taken, then the bill is considered vetoed. This inaction is referred to as a "pocket veto".

In the recent past, it appears the Governor has taken action within the 10-day window, even when it isn't required. We will monitor the bill and update our blog when action is taken.

EDIT
Obviously, the Governor's resignation will impact the timing of the actions taken in some way. Again, we will continue to monitor and update our blog when action is taken.

In researching an issue this week, we stumbled across an article titled, The Anatomy of a Lump-Sum Conversion, written by Corey Swarner, CPC, MBA of Milliman. 

In various posts, we've attempted to provide readers with an understanding of actuarial math including the time-value of money, and actuarial concepts such as life expectancy. But we think Corey really nailed it, and wanted to share his article, which you can read here:

https://us.milliman.com/en/insight/the-anatomy-of-a-lumpsum-conversion/

We think this article nicely describes how an actuary calculates an actuarial present value, which is used for lump-sum distributions as well as determining contributions and a defined benefit plan funded ratio. Enjoy!

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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.

There are two bills that have been introduced in the current session regarding LOSAP. One appears to be on track to be passed by both houses in 2021. They both would impact only volunteer firefighter LOSAPs adopted pursuant to Article 11-A, not volunteer ambulance squad plans governed by Articles 11-AA and 11-AAA. The purpose of this post is to examine one that is making some progress.

This bill would extend the maximum years of service credit that can be earned by a participant from 40 to 50 years. A similar bill was introduced in 2019 and 2020. Both times the bills were passed by the Senate but died in committee in the Assembly. That version of the bill simply crossed out the word "forty" and replaced it with "fifty".

This current bill was introduced as S1091 & A2239, with the same proposed change. However, on March 22, 2021, the Senate version was amended and reprinted as S1091-A. It is currently in the third reading, which is the last step before a vote and potential passage by the Senate. In the Assembly, the bill was amended and reprinted as A2239-A, and then recommitted to the local government committee. The amendment is what makes us think this bill is likely to pass both houses in 2021.

The amendment adds additional language that fleshes out the details of how a sponsor would implement an amendment to increase the service cap. The new law provides that a sponsor can:

1. Extend the maximum years of service credit for up to an additional ten years.
2. The extensions can happen all at once or in increments.
3. The sponsor must adopt a resolution and obtain voter approval at a mandatory referendum.

When discussing with clients the original version of the bill that simply replaced forty with fifty, there were two recurring questions: (1) is it mandatory for plans to increase to the 50-year maximum, and (2) if it is not mandatory, is a referendum required? We believe both of these questions are now answered - it is not mandatory and yes, a referendum is required. By removing these two ambiguities, the legislature seems to understand these clarifications were necessary before the bill became law. This appears to be a positive sign that the bill is tracking towards law in 2021.

If you'd like to read the bill, you can download a PDF here: 

​We'll comment on the other bill in a future post.