Troy officials discuss future of firefighter incentive plan

TROY — After a lengthy legal process with the IRS, the city of Troy has been required to alter the retirement incentive plan for its Fire Department employees — a turn of events that has some firefighters worried.

The Troy Fire Department consists of 12 full-time staff members and more than 100 volunteer members. Fire Chief Peter Hullinger said that the issue with the IRS goes back several years.

“What has occurred is that, unfortunately, for a couple of years, the IRS has been inquiring about the city and the city has been working with the IRS in this time alongside a legal firm that specializes in this area,” he explained. “They tried to maintain the previous plan but they determined they wouldn’t be able to. Now it has to be closed out to meet the IRS concerns.”

The IRS declared that the previous plan provided benefits that were greater than those allowed by a tax-exempt program known as a Length of Service Award Program for volunteer firefighters.

“Our volunteer firefighter incentive trust goes back to 1979. In 2014, a previous administration and council approved a new volunteer firefighters trust. They sent it at the time to the IRS, and the IRS came back to the city and said this wouldn’t work, so in 2016, the city administration, with outside legal counsel, drafted an updated incentive trust,” Mayor Ethan Baker elaborated. “It was approved, but later there was a question of whether the amount of accruing payments was more than was allowable to be tax exempt. … Changing the plan was never something the city wanted. (The previous incentive plan) was something we spent years in negotiations trying to keep.”

The city was required to come up with a replacement plan and trust for the department’s retirement policies that would comply with IRS regulations. Baker said that the proposed plan and trust “incorporates many aspects of the current plan and trust,” but some firefighters are saying this wouldn’t be enough.

“The draft plan didn’t compare in any way to the old plan and what it promised,” said Fire Department member Edward Ross. “You (used to) earn about $850 per year in retirement, plus more per every additional year beyond 10 years (that you worked), and you would get that amount every year in retirement. Now that would go away. It incentivized people to stay on longer (in the department).”

Baker said that this is only a proposed plan and that the details are likely to change before a final version is made.

“We haven’t settled on the numbers for the new plan,” he said. “The proposed plan is just a draft. The council saw it only a day before the firefighters did. It was primarily a draft to show the revised structure. We have three months to work out how to finalize a new plan, and we are certain that the final plan will look different than the proposed one.”

Part of the plan includes giving a lump sum of money to retired firefighters to compensate them for no longer receiving monthly benefits under the plan.

“There has been a fear in some of our firefighters in the community that they won’t be made whole, but the lump sum payments will address that,” said Baker. “While that is different from receiving monthly payments, they will be getting their full benefits. They will then be transferred into the new plan with the same amount of service they already have in.”

Ross said that this could cause further issues for firefighters living on fixed incomes, since the lump sum payment would count as taxable income.

“Because it’s now taxable, those on Medicare may have trouble qualifying for it this year,” he said. “Retirees relying on this monthly stipend would have that stipend go away.”

Ross added that the loss of the previous plan also could hurt recruitment and firefighter retention.

“Each station has a maximum capacity of 30 staff, and none have that full 30 people,” Ross said. “If we remove that incentive, it will be even tougher to keep people on and find new people to join.”

Hullinger said that he doesn’t think the changes will impede the department’s ability to operate but conceded that they may need to explore options as time goes on if more volunteers don’t stay with the department as long as they did previously.

“The city will work with the Volunteer Incentive Committee to try and find a new plan that works,” said the chief. “Will some people not stay? It’s possible. As far as recruitment goes, most people join the department because they want to help. Financial incentives aren’t why they join up. It could affect us in the long run with how long people want to serve, but I don’t think it will significantly hurt the department.”

The city of Troy said in a press release that the old plan will be closed on April 30, and the City Council will establish a new plan effective May 1.

“We want to do everything we can to make sure our firefighters can be made whole and that a new plan moving forward isn’t something they feel is shoved down their throats,” remarked Baker. “We have to pay out all of the accumulated benefits our retirees have. We will hire an individual actuarial firm to find out the present value of each firefighter and retiree’s benefit worth and pay that amount out.”

“When we signed up they promised us X, Y and Z, and this new (proposed) plan is so different from the old plan it’s ridiculous,” said Ross. “I think firefighters mostly want the city to get as close to the old plan as possible.”