Max LOSAP Service Credit May Now Be 50 Years!

A little over three weeks ago, Governor Cuomo signed Bill S1091A which extended the maximum number of years of credit a volunteer firefighter could earn under the Service Award Program point system from forty years to fifty years.

When our clients originally adopted their Service Award Program, many allowed their volunteers to earn up to forty years of credit in the program which was the maximum number allowed under Articles 11-A of the New York State General Municipal Law. As a way to minimize the initial cost of their program, many sponsors of volunteer firefighter Service Award Programs limited the maximum number of years credit a volunteer could earn under the point system to thirty, twenty or even fewer years.  That way, when the cost of the so called ‘buyback’ was paid off by the sponsor, the sponsor could hold an election to increase the max number of years of credit to up to forty years. The associated net cost increase to go to forty year max credit was usually less than the cost while the buyback was being paid down.

We followed this new bill before it made its way to the Governor’s desk.  Together with NYS attorneys, we helped draft the final version of the bill with the staff of NYS legislators. 

Now that it is law, our major concern is that we believe the bill is being misunderstood.

The earliest a program may have been established in NYS was as of January 1, 1990.  For those programs which were established effective January 1, 1990, 2020 was the 31st year of the program.  For those programs which included up to five years credit for the ‘buyback’ for service before 1990 (the vast majority of 1990 programs did that), the most service credit any participating volunteer could have earned as of August 31, 2021 is 36 years. That means it will be at least 3.5 years from now before a volunteer could possibly earn forty years of credit. For those programs effectively established after 1990, it will be at least 4.5 years from now before a volunteer could possibly earn forty years of credit.

So, if your board of fire commissioners, town board or village board is considering increasing the maximum service credit to fifty years, there is no need to rush and hold the election (mandatory referendum required). In addition, the cost increase to make this change to your program will depend directly on the number of volunteers participating in your program who have close to forty years of service credit. How many will continue to be active? How many will earn 40+ years of service credit under the point system?

So, don’t rush to make this change and by so doing give us at Penflex Actuarial Services enough of a time frame of point system experience to calculate a realistic estimated cost of making this change to your program (you will need to disclose that estimated cost in the voter proposition used for your mandatory election). Moreover, if you are considering making other changes to your program (like increasing the Service Award from $20 to $30 in a defined benefit program) it might make most sense to seek voter approval of both changes in the same election (i.e. increasing the Service Award AND increasing the maximum number of years of servicer credit a volunteer can earn in the program in one election). At this point, we don’t expect that the cost increase to allow a participant to earn 50 years of service credit will be significant. Asking your voters to approve two amendments in one election (especially one with a small price tag) may be prudent.

Edward J. Holohan

President & Senior Actuary

Penflex Actuarial Services, LLC