Clinton to Give Firefighters Retirement Benefits
On Aug. 31, the Clinton Board of Selectmen approved an ordinance establishing retirement benefits for the town’s volunteer firefighters. The decision came after an Aug. 24 hearing to answer questions and receive public comments on the plan.
The Length of Service Award Program (LOSAP), which operates similarly to a pension plan, was created by the federal government to help towns maintain their volunteer fire departments. Towns that lose their volunteer firefighters risk assuming the tax burden associated with a full-time, paid fire department.
By some estimates, the volume of emergency calls nationwide has increased threefold over the last 25 years, at the same time the number of volunteers has diminished by half. Because LOSAP rewards firefighters for continuous years of active service, it’s seen as a tool for retaining veteran members as well as recruiting younger ones. According to the National Volunteer Fire Council, approximately 20 percent of the nation’s volunteer firefighters participate in some type of LOSAP, and LOSAP plans administered by states, municipalities, or Volunteer Firemen’s Insurance Services are in place in at least 45 states.
“It is our hope, and our intention, that this plan will act as a recruitment and retention vehicle,” said David Burns, a 38-year veteran of the force who was instrumental in bringing the plan to Clinton. “It’s becoming more and more difficult to attract and maintain volunteers. And the burden of a paid department would cost the town millions of dollars.”
In a town meeting last year, LOSAP was voted in as a line item in the 2016-2017 budget; $120,000 was set aside to cover funding of the plan plus related expenses. The $120,000 LOSAP budget item, said Burns, pales in comparison to the potential cost of a paid fire department.
According to the National Fire Protection Association, 756,400 volunteer firefighters serve in 27,595 fire departments across the country (including 20,200 volunteer-only fire departments), and the estimated value of time donated was approximately $129.7 billion in 2009, the most recent year for which statistics are available.
Burns said most shoreline towns in the area, with the exception of Clinton, established a LOSAP for their fire and emergency volunteers in the late ’80s and early ’ʼ90s. Virtually all of these, he says, are defined benefit plans with early retirement provisions and survivor benefits.
Clinton will offer two types of LOSAP plans to its volunteer fire department, neither of which includes early retirement provisions or death benefits. The first, a defined benefit plan, offers a cash payout of $400 per month to any retired firefighter who is at least 65 years of age and has had 20 or more continuous years of active service with the Clinton Volunteer Fire Department (CVFD). Forty-four members have chosen the defined benefit plan, and eight are currently eligible to start receiving monthly payouts. To avoid the potential for any unfunded liabilities, the defined benefit plan will not be available to new CVFD members.
Forty-eight CVFD members will participate in another form of LOSAP—a defined contribution plan, whereby the town contributes $1,000 annually to a 457(e) plan for each eligible firefighter. Similar to the way a 401(k) works, the money in a firefighter’s 457(e) is invested and expected to grow over time; after a plan member leaves the department, his or her money can be rolled into an IRA or 401(k) plan. Members must meet eligibility requirements for five years to be vested in the plan. Unlike a 401(k), members cannot contribute to their own 457(e) plan.
Once an agreement is signed, a firefighter may not change from one type of plan to another. The plan has been structured so that over a period of years, the defined benefit plan will be completely phased out, and only the 457(e) plan will remain.
Questions at the Aug. 24 public hearing centered on what happens when a firefighter takes a leave of absence. Although they don’t continue accumulating time during their leave, those volunteers who are granted a request for a leave of absence or other break in service don’t lose any credit toward their defined benefit or their vesting in the defined contribution plan. Upon their return, the time they put in before and after their break will count toward their eligibility and vesting.
A Long Road
Burns says Clinton formed its first LOSAP committee in 1990 and has had three or four committees since then.
“I was tasked by the current fire chief to head up a new committee four years ago. The Clinton Volunteer Fire Department paid $4,000 for an actuarial report for a defined benefit plan similar to those in surrounding towns. We used the same company that handles Old Saybrook’s LOSAP program, and we presented our plan to the Board of Selectmen and the Board of Finance. The Board of Selectmen established a town committee, of which I was a part, and we have been in negotiation for the last four years.”
Early on, the committee determined that Clinton couldn’t afford to offer defined benefit plan to all CFVD members, so it moved to a combination of defined benefit and defined contribution plans. Eligibility is based on the same determining factors used for the tax abatement program for CVFD firefighters, which requires, among other things, participation in 51 calls, five meetings, fundraising hours, and other service qualifications, as well as maintaining certification as a firefighter, EMT, or both.
Contributions to the plan made by the town may not be used for any other purpose, and the town expects to continue the plan indefinitely. If at some point a decision is made to suspend or discontinue the program, it must be done by a vote of the town’s legislative body, following a public hearing.
At the Board of Selectmen meeting, resident Kirk Carr raised concerns about the possibility that the defined benefit plan—which could result in payments $400 per month for life, after retirement, for as many as 44 firefighters—could become an unfunded pension obligation for the Town of Clinton if the interest-rate projections it’s based on are overly optimistic. He also questioned the defined benefit plan’s usefulness as a means of sustaining a volunteer fire department.
“Perpetuating an all-volunteer fire department is clearly in the best interest of taxpayers,” he said. “However, defined benefits for previous service will have little if any effect on perpetuating the volunteer model, and every dollar expended on previous service will not be available to reward future service.”
He added that taypayers who would be now be paying for these benefits may not have even lived in Clinton when those services were rendered. He asked that the selectmen table the LOSAP item on the agenda and consider an alternative to the proposed plan.
The motion to approve the ordinance carried, and the plan goes into effect immediately.