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ARTICLE 11-A SERVICE AWARD PROGRAMS:
Double Dipping and Age Discrimination

By Ed Holohan, Actuary and Penflex President, 9/04

Are senior active volunteer firefighters who are being paid Service Awards while they continue to earn credit under the Service Award Program point system “double dipping?”

May a Service Award Program provide that senior active volunteer fire-fighters who are being paid Service Awards be prohibited from earning credit under the point system after the effective date that the service award payments commenced?

The answer to both these questions is, “no.”

Although they are often referred to as “pension” plans or “pension-like”
programs, Service Award Programs are not pension plans. Moreover, even though they are “deferred payment programs”, they technically are not “deferred compensation programs” as the term is defined in Section 457 of the Internal Revenue Code for W-2 issued employees who elect for example to “defer” receipt of a portion of the salary paid to them by their local government employer.

Service Awards are payments usually made by local governments to volunteers who perform firefighter services. In New York State, an active volunteer firefighter of a political subdivision which has established a volunteer firefighter Service Award Program must receive credit under the Program for each calendar year during which the volunteer’s firefighting activities measured under the point system set forth in Article 11-A of the General Municipal Law equals or exceeds fifty “points.” By requirement of Article 11-A, payment of the Service Award earned by a volunteer for his or her total years of Service Award Program credit earned under the Point System cannot commence except in the case of death or disablement and subject to the Article 11-A vesting requirement before the volunteer attains the “entitlement age.” Upon attainment of the entitlement age, the volunteer is paid or begins to be paid the accumulated Service Award he or she earned for the years of credit he or she earned under the point system before
attaining the entitlement age. If the volunteer continues to be active and earns credit under the point system for calendar years after attaining the entitlement age and having been paid an accumulated Service Award for his or her volunteer service rendered before attaining the entitlement age, the volunteer must be paid additiona Service Awards for each additional year of credit earned. In other words, the volunteer must be paid an additional year’s “salary” because he “worked” an additional year. The Service Award paid to the volunteer attributable to one calendar year of firefighting service is the compensation the volunteer is paid for having earned fifty points under the point system during that calendar year. The Service Awards the volunteer was already paid or is already being paid is his compensation (not his pension) attributable to previous calendar years of active firefighter service.

Suppose you signed a five year contract with someone to mow your lawn. You paid him under the terms of the contract over the five year period. At the end of five years, you contracted with him to mow your lawn for another three years. Would you have to pay him for the three additional years of lawn mowing? Obviously, you would and there would be no “double dipping” (double payment) because you wouldn’t pay him again for having mowed your lawn during the previous five years and you would only make the additional payments for the three additional years.

As simple as this lawn mower compensation contract is, the same principle applies to Service Award Programs.

And, because Service Awards are really “salary” payments to volunteer firefighters, as an “employer” of volunteers, a local government Service Award Program sponsor cannot put any age related restrictions on those payments. Such restrictions are un-enforceable under ADEA (the federal Age Discrimination in Employment Act).

One such example of an ADEA violation in Service Award Programs is the requirement in some defined benefit programs that an entitlement age participant must “waive’ monthly payment Service Awards earned for active volunteer firefighter service already rendered to retain the “right” to continue to earn credit under the point system. This is like telling an employee on say their sixty-fifth birthday that because they are now sixty-five years old they will have to give back to the employer some of the salary that they have already been paid in order to continue in employment and be compensated after age sixty five at the same pre-age sixty five rate.

If the drafters of the original version of Article 11-A had written the law to specify that earned Service Awards were not to be paid until the volunteer separated from active volunteer firefighter service (but not before the attainment of the entitlement age), there would be no confusion or issues about Service Award Program participants who continue to be active volunteer firefighters after attaining the entitlement age.