On July 20, Sen. Hillary Clinton (D-N.Y.) introduced the Volunteer Emergency Responder Recruitment and Retention Act of 2007 (S. 1840). The bill, the companion to H.R. 2160 in the House, would clarify the treatment of length of service award programs in the federal tax code. LOSAPs are similar to pension programs and exist for use by volunteer emergency services personnel. About 20% of America’s volunteer firefighters participate in some form of a LOSAP.

"This legislation is crucial for the volunteer fire and emergency services," said National Volunteer Fire Council Chairman Philip C. Stittleburg. "LOSAPs have no clear place in the current federal tax structure. This creates problems for states and communities that want to provide LOSAPs for their volunteers but face unnecessary complications in setting up programs. For this reason, LOSAP participation is lower than it otherwise would be, and the programs that do exist are more difficult to administer."

LOSAP treatment in the current tax code has not been updated legislatively since 1996. In 2002, NVFC formed a LOSAP Committee to examine current law and come up with ideas for clarifying how LOSAPs are taxed. The NVFC then worked closely with members of Congress and other emergency service groups to develop the Volunteer Emergency Responder Recruitment and Retention Act.

The point of LOSAPs are to provide participants with a financial benefit after they reach a certain age and length of service. As with pension plans, LOSAPs should be taxed when a beneficiary begins drawing from it, not each year when a payment is made into the LOSAP account. S. 1840 would fix this problem.

Another major change that S. 1840 makes is to increase the limit on how much can be contributed into an individual's LOSAP account each year from $3,000 to $5,000. The $3,000 limit was established in 1996 and has not been increased since. The bill also creates a mechanism for adjusting the $5,000 limit based on inflation.