Opinion 2003 - 3


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

FIRE DISTRICTS -- Powers and Duties (maximum benefit under defined benefit service award program)
VOLUNTEER FIREFIGHTERS -- Service Award Programs (maximum benefit under defined benefit plan)

GENERAL MUNICIPAL LAW 217, 219: The maximum benefit that may be provided under a defined benefit plan service award program cannot exceed a monthly payment for life of twenty dollars for each year of firefighting service credited under the program, subject to a maximum of forty years of firefighting service. A fire district may not establish a defined benefit plan service award program that provides a service award equivalent to forty dollars per month for each year of firefighting service credited under the program, based on no more than twenty years of firefighting service.

You ask whether a fire district may establish a defined benefit plan service award program for the active volunteer firefighters of the fire district's fire department, that provides a service award equivalent to forty dollars per month for each year of firefighting service credited under the program, based on no more than twenty years of firefighting service.

Article 11-A of the General Municipal Law (214 et. seq.) authorizes certain "political subdivisions" to establish, and thereby become the "sponsor" of, service award programs for volunteer firefighters (General Municipal Law 215[10], 216[1], [2], 216-a). The purpose of these programs is to facilitate the recruitment and retention of volunteer firefighters, through the payment of a form of municipally-funded deferred compensation for the performance of certain activities in connection with providing fire protection and other emergency services to the local government sponsor of the program (see 2002 Opns St Comp No. 2002-2, p 4; 1994 Opns St Comp No. 94-32, p 57).

A service award program may be either a "defined benefit plan" or a "defined contribution plan" (General Municipal Law 215[2], [3], [9], 217 [opening paragraph], 218, 219). With respect to defined benefit plans, the opening paragraph of section 217 of the General Municipal Law provides, in part, that "[a]ny service awards provided to an active volunteer firefighter under this article shall be governed by the provisions of section two hundred nineteen in the case of defined benefit plans " Subdivision (a) of section 219 provides that "[a]n active volunteer firefighter's service award program that is a defined benefit plan shall be subject to minimum and maximum retirement benefit requirements as set forth in subdivision (b) of this section." Subdivision (b) of section 219, in turn, provides that:

The minimum and maximum retirement benefit requirements for a service award program that is a defined benefit plan shall be defined as follows. Each participating active volunteer firefighter shall be entitled to a minimum service award benefit of five dollars per month for each year of firefighting service completed after satisfying the program's eligibility requirement and after establishment of the program. The maximum benefit amount payable to a participating active volunteer firefighter entitled to a benefit shall be determined on the basis of an actuarial valuation. The valuation shall take into account the age, and such other factors as the actuary deems appropriate, of the eligible participating active volunteer firefighters and the amount of available financing available per active covered volunteer firefighter. The maximum service award under a service award program shall be a monthly payment, payable for life, that does not exceed an amount equal to twenty dollars for each year of firefighting service credited under the terms of the program to a maximum of forty years of firefighting service (emphasis supplied).

Section 217(h) provides that a service award program may designate that benefits thereunder be paid in the form of a lump sum, a life annuity with or without survivor benefits, period certain annuities, or any other form provided under the program, but "[a]ll forms of benefit payments shall be actuarially equivalent to each other."

Thus, by its express terms, section 219(b) clearly limits the amount of a defined benefit plan service award to a monthly payment for life, computed at the rate of twenty dollars for each "year of fire fighting service" credited under the program, based on no more than forty "years of firefighting service" . Although section 217(h) authorizes a service award to be paid in forms other than a monthly payment for life (e.g. a single lump sum), such alternative forms of payment must be actuarially equivalent to a monthly payment for life computed at the rate of twenty dollars for each year of service credit, subject to a forty year limit on service credit.  There is no authority to permit service awards to accrue at a rate of more than twenty dollars per year of service credit, applied to a maximum of less than forty years (cf. General Municipal Law 217[b], providing that each sponsor may establish a percentage table that provides for a "faster rate" of becoming nonforfeitable).

The legislative history of Article 11-A of the General Municipal Law supports this conclusion. Article 11-A was added by chapter 775 of the Laws of 1988. The legislative sponsor's memorandum in support of the bill enacted as chapter 775, with obvious reference to defined benefit plans, states that:

The payments of the service award shall be subject to certain minimum and maximum requirements. There shall be a minimum service award benefit of five dollars ($5) per month for each twelve month period during which an active volunteer firefighter participates in the fire service and satisfies the minimum requirements of participation established by the fire district sponsoring the service award program. * * * The maximum service award shall be a monthly payment, payable for life, that does not exceed an amount equal to twenty dollars ($20) per month for each year of firefighting service credited under the terms of the program (Governor's Bill Jacket for chapter 775 of the Laws of 1988, Memorandum of Senator LaValle in support of S. 5605B/A. 7535 B; emphasis supplied).

Moreover, in commenting to the Governor on the bill enacted as chapter 775, the New York State Pension Commission described the defined benefit plan as "establish[ing] a minimum monthly benefit of $5 for each year of firefighting service and a maximum monthly benefit of $20 per year of service up to a maximum of 40 years (or $800 a month)" (Governor's Bill Jacket for chapter 775 of the Laws of 1988, Letter to Nancy Gleason Groenwegen, Esq. from Wayne Schneider, dated November 22, 1988; emphasis supplied). Similarly, the Department of State stated that "[u]nder the proposed statute the pay-out would be an amount between five and twenty dollars per month times the number of years of firefighting service credited up to a maximum of forty years" (Governor's Bill Jacket for chapter 775 of the Laws of 1988, Memorandum to Evan A. Davis, Counsel to the Governor, from James N. Baldwin, Executive Deputy Secretary of State, dated December 27, 1988; emphasis supplied).

In addition, this conclusion is consistent with the purpose of Article 11-A. The legislative sponsor's memorandum in support of the bill enacted as chapter 775 states that the bill would provide "an incentive for the recruitment and retention of volunteer firefighters." By providing that a service award may be based on up to forty years of firefighting service, it seems evident that the legislature intended service award programs to provide an incentive for service for up to forty years. A service award program that provides a greater monthly amount applied to a shorter maximum number of years would be inconsistent with this purpose.

Accordingly, the maximum benefit that may be provided under a defined benefit plan service award program is equal to a monthly payment for life of twenty dollars for each year of firefighting service credited under the program, subject to a maximum of forty years of firefighting service. Thus, it is our opinion that a fire district may not establish a defined
benefit plan service award program that provides a service award equivalent to forty dollars per month for each year of firefighting service credited under the program, based on no more than twenty years of firefighting service.

June 2, 2003

Anthony R. Nanula
Deputy State Comptroller