The various associations that represent the volunteer fire service in New York State are working to have legislation adopted that would allow nominal compensation to be paid to volunteer firefighters.
We thought it would be helpful to outline our thoughts regarding the current proposed legislation, and if allowing nominal compensation to volunteer firefighters here in New York would impact a volunteer’s ability to participate and earn additional LOSAP benefits.
As things currently stand, New York State Article 11-A of the General Municipal Law (GML) – the statute that governs volunteer firefighter LOSAPs – does not reference compensation (or the lack thereof) as a contingency of participation in a LOSAP. It simply defines what it is to be an eligible volunteer firefighter.
The Internal Revenue Code (IRC) does mention compensation with respect to eligibility, which is why it must be considered when these laws are being crafted.
The proposed NYS bill addresses the eligibility issue, and it provides the proper guardrails that would allow volunteer firefighters to receive nominal fees and LOSAP at the same time. This includes being awarded points for activities for which the volunteer is also receiving a nominal fee.
Of course, the details matter – specifically the dollar amount that is considered a nominal fee and what entity would ultimately decide that answer. Based on what we know now, we are of the opinion that paying volunteers firefighter a nominal fee would not impact their ability to participate in LOSAP.
The current bill is New York State Assembly Bill A10630. It states the following:
- Defines “pay per call” and “paid on call compensation” to be a nominal fee.
- Defines a “volunteer firefighter” to have the same meaning as in the Volunteer Firefighters’ Benefit Law (VFBL), essentially stating that receiving this nominal fee does not make a volunteer firefighter a paid firefighter and thereby lose VFBL coverage.
- States the nominal fees paid cannot exceed 20% of what a paid firefighter would receive for providing similar services in the location of the Authority Having Jurisdiction (AHJ).
The first two points specifically address the nominal fee language in the IRC (more on this later), making it clear that the intention and requirement of this compensation is to be a nominal fee.
The third point mirrors the ruling from the Federal Department of Labor (DOL), which stated that it would consider an individual to still be a volunteer firefighter for the purposes of the Fair Labor Standards Act (FLSA), as long as the compensation the person received did not exceed 20% of the typical compensation to a paid firefighter. This is a little more nuanced, since the purpose of the DOL ruling was for FLSA, not LOSAP eligibility. Further, the IRS could eventually issue a different interpretation of what a nominal fee would be for the purposes of being a bona fide volunteer as defined in 457(e)(11). Nevertheless, for the present time it would seem the DOL test is a reasonable one for determining if compensation paid is a nominal fee as defined in 457(e)(11).
Perhaps most importantly, the proposed Bill A10630 includes this specific language:
VOLUNTEER FIREFIGHTERS RECEIVING PAY PER CALL AND PAID ON CALL COMPENSATION (STIPENDS) SHALL BE PERMITTED TO EARN POINTS AND RECEIVE PAYMENTS UNDER A SERVICE AWARD PROGRAM ADOPTED FOR THEIR FIRE DEPARTMENT OR FIRE COMPANY UNDER ARTICLE ELEVEN-A OF THIS CHAPTER.
It seems clear that the intention is to allow an individual to receive the stipend and the points for the activity, although it would be better if the language specifically stated as much.
Even without this language, the bill is very carefully allowing an individual to continue to be considered a volunteer firefighter for the purposes of VFBL and other statutes, and the only NYS eligibility requirement for participation is to be a volunteer firefighter (read further for more details). Therefore, if an individual is considered a volunteer firefighter, such person can earn points for the activity even if a nominal fee is also paid.
About the IRC Eligibility Rules:
Most readers of this article were familiar with term Authority Having Jurisdiction (AHJ). When it comes to compensation, the AHJ is the Internal Revenue Service (IRS) and its interpretation of the IRC. It doesn’t matter what a state, local government, or an employer calls a payment – it is federally taxable unless the IRC says it is not (or that taxation on that compensation can be deferred to a later date).
Section 457(e)(11) of the IRC is why A10630 specifically includes the three points previously noted. Here is what this section of the IRC states about eligibility to participate in a LOSAP:
- Section 457(e)(11) of the IRC sets the limits on the benefits that can be provided and the qualifications of volunteers to participate in a LOSAP. A program that qualifies as a LOSAP under this section of the Code is exempt from having to comply with all the other requirements of Section 457.
- The same IRC section states that an individual eligible to participate in a LOSAP must be a “bona fide volunteer”, which is defined as someone who provides “qualified services” – firefighting and prevention services, emergency medical services, and ambulance services – and that the individual can only receive the following types of compensation:
- Reimbursement for (or a reasonable allowance for) reasonable expenses incurred in the performance of services.
- Reasonable benefits (including LOSAP) and nominal fees for such services, customarily paid by eligible employers in connection with the performance of such services by volunteers.
- Reimbursement for (or a reasonable allowance for) reasonable expenses incurred in the performance of services.
The eligibility requirements set forth in Article 11-A of the GML align with the qualified services definition in the IRC:
- GML Section 215(1): 1. “Active volunteer firefighter” means a person who has been approved by the authorities in control of a duly organized volunteer fire company or volunteer fire department as an active volunteer firefighter of such fire company or department and who is faithfully and actually performing service in the protection of life and property from fire or other emergency, accident or calamity in connection with which the services of such fire company or fire department are required.
This section of the GML does not mention anything about compensation, but it didn’t need to because up to this point, volunteer firefighters could not be compensated. Therefore, the requirements for a volunteer firefighter in NY State to participate in a LOSAP met the IRC standard. Once nominal fees are introduced as a concept, it was important to address the IRC standard, which the bill has done.
Another important point to consider is that if the statute is amended to allow nominal compensation, then there will now be multiple ways a volunteer can be compensated – State training stipends, local training stipends, and now nominal compensation. The AHJ must consider all forms of compensation that could potentially be received by its volunteers to ensure, in aggregate, the amount received remains nominal in total.
We covered the new training stipends in a previous blog post, which can be read here: Training Stipend Post. In summary, the training stipends were properly classified as “nominal fees”, so a volunteer receiving those fees continue to meet LOSAP eligibility rules under the IRC.
Additionally, Section 216(3)(d) of the GML states:
- (d) Payments under the service award program if adopted, shall not impair any rights of the volunteer firefighters under the volunteer firefighters’ benefit law or any other law.
Although this statute was mainly intended to address that being paid a LOSAP benefit does not disqualify a firefighter from VFBL coverage, it does include the tag “or any other law”. This perhaps strengthens the understanding that a volunteer could receive a stipend and LOSAP points for the same activity, though LOSAP points is not a payment.
In summary, A10630 is carefully drafted to ensure that accepting nominal compensation does not impair a volunteer their LOSAP eligibility. However, this is likely a fluid situation as this bill works its way through the process, so any reader of this blog should be aware that the information contained herein is as of the date this blog post was published. We will provide an update if the proposed statute changes, which may alter the information in this post.
DISCLAIMER: Firefly does not provide legal or tax advice and this article is not intended to be such – the reader should discuss this post and topic with your own legal and tax advisor.