As the 116th Congress comes to a close, Democratic and Republican members of the House Ways and Means Committee released a bill to assist people in saving for their retirements. The Securing a Strong Retirement Act of 2020
(H.R. 8696), introduced by Representatives Richard Neal (D-MA) and Kevin Brady (R-TX), contains several important changes aimed at helping people bolster their retirement savings. Three of these changes in particular could have major impacts on fire departments and firefighters of all ranks:
1) Pensions in 501(c)(3) Fire Departments:
In many states across the US, volunteer fire departments have been hiring full-time firefighters and EMS personnel to assist in covering ever-increasing call volumes. Since many of these volunteer fire departments are technically organized as a 501(c)(3) entity, their career staff are unable to participate in local pension plans. The Internal Revenue Service has forced states to abandon plans to grant eligibility to these 501(c)(3)-employed personnel since the 501(c)(3) agency technically is not a governmental entity. H.R. 8696 would permit states to grant permission for these 501(c)(3)-employed firefighters to join a local government pension plan. It is important to note that this legislation does not automatically add these career personnel into a pension plan. States must still grant pension eligibility and then the fire department itself must make add these individuals into a pension plan.
2) Exclusion of Disability Retirement Income:
Firefighters forced to medically retire from their fire departments often may receive payments from a service-connected disability pension. Under current tax law, these pension payments must be included with other income sources when calculates the retiree’s gross income. H.R. 8696 would allow retirees to exclude payments from service-connected disability pensions when calculating their gross income.
3) Early Retirement Penalty Waiver for Private Firefighters:
Under current tax law, there is a 10% early payment penalty for retirees who receive payments from their pension before reaching age 55. Firefighters employed by a governmental fire department only receive this 10% penalty if they receive payments before reaching age 50. Firefighters employed by private agencies however do not qualify for this earlier retirement age. H.R. 8696 would allow privately-employed firefighters to qualify for the same protections as publicly-employed firefighters who are protected from the early payment penalty beginning at age 50.
The IAFC appreciates the House’s strong bipartisan interest in ensuring firefighters and EMS personnel have all possibilities to save for their retirement and receive the benefits they have earned through the course of a long career. The IAFC urges Congress to pass H.R. 8696 during the upcoming “Lame Duck” session.
Evan Davis is a strategic government relations manager for the IAFC.