U.S. Rep. Peter King (R-N.Y.) recently reintroduced the Volunteer Emergency Services Recruitment and Retention Act (H.R. 2160), a bill that would clarify the treatment of length-of-service award programs in the federal tax code. LOSAPs are pension-like programs for volunteer emergency services personnel. Nearly 20% of the volunteer firefighters in America participate in some form of LOSAP. Virgil Goode (R-Va.) and Bill Pascrell (D-N.J.) are original co-sponsors of H.R. 2160.  

The treatment of LOSAPs in the existing tax structure is ambiguous at best and has not been updated legislatively since 1996. In 2002, the National Volunteer Fire Council 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 King and other fire service groups to develop the Volunteer Emergency Services Recruitment and Retention Act.

"This legislation is crucial for the volunteer fire and emergency services," said NVFC Chairman Philip C. Stittleburg in a press release. "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."

The point of LOSAP is 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. H.R. 2160 would fix this problem, according to the NVFC.

"H.R. 2160 does not decrease or eliminate taxation of LOSAPs or force any new requirements on existing LOSAPs,” Stittleburg said. “This bill simply clarifies how LOSAPs should be taxed, giving volunteer emergency service organizations and state and local governments a clear legal framework to administer their LOSAP internally."

Another major change that H.R. 2160 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.

H.R. 2160 also:

• Clarifies that in any given year a LOSAP sponsor can contribute more to a volunteer's LOSAP plan than it pays that individual for volunteering.
• Allows non-governmental LOSAPs to be treated as governmental, exempting them from Employee Retirement Income Security Act vesting and funding requirements that are unrealistic for plans the size and scope of a typical LOSAP.

Stittleburg urges all NVFC members and supporters of the volunteer fire and emergency services to asak their representative in Congress to co-sponsor H.R. 2160.