[Congressional Record Volume 141, Number 101 (Tuesday, June 20, 1995)]
[Extensions of Remarks]
[Page E1301]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


         AMENDMENT TO EXCLUDE LENGTH OF SERVICE AWARD PROGRAMS

                                 ______


                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                         Tuesday, June 20, 1995
  Mr. HOUGHTON. Mr. Speaker, I am joined today by several of my 
colleagues, including Mr. McNulty, Mr. Ackerman, Mr. Bunning, Mr. 
Volkmer, and Mr. Shaw, in introducing legislation to exclude Length of 
Service Award Programs [LOSAP's] for volunteers performing firefighting 
or prevention services, emergency medical services or ambulance 
services from section 457 of the Internal Revenue Code. Likewise, the 
legislation would exempt the LOSAP's from FICA and Medicare taxation. 
This corrective legislation would support the important role that 
volunteer firefighters and rescue personnel play in small towns and 
rural areas across the United States.
  There are approximately 150,000 volunteer firefighters in about 37 
States, who receive nominal awards, about $250 per year on average, 
under LOSAP's from their governmental or tax-exempt fire districts. 
Volunteers earn awards under a LOSAP while they are performing 
volunteer services, on the basis of their years of service. However, 
the awards are not actually paid to volunteers in cash until after they 
have retired as volunteers. There are similar award programs for 
volunteers performing other emergency medical services, such as rescue 
personnel and ambulance drivers.
  These nonqualified plans are covered by section 457. Participants 
under a section 457 plan normally report for tax purposes any 
compensation deferred and any income attributable to the amounts when 
it is actually received, similar to so-called qualified pension plans. 
However, one of the requirements for delayed taxation under section 457 
is to limit such deferred amounts to a percentage of compensation paid. 
Of course, with most volunteer fire and rescue personnel, there is no 
regular pay, or only nominal amounts to cover expenses. Section 457 is 
in the Code to prevent governmental and tax-exempt entities from 
setting aside excessive amounts of tax-deferred income for the highly 
compensated employees, while at the same time being able to avoid the 
nondiscrimination rules that are applicable to qualified plans. 
Volunteers are far from being highly compensated, so our proposal does 
not undermine this policy.
  However, the result of the current limitations may be to tax the 
volunteer with zero or minimal pay, on the amounts set aside as LOSAP's 
for retirement, at the time the amounts vest with the volunteer; that 
is, there are no restrictions on the receipt other than the passage of 
time. This could result even though it may be years before the 
volunteer will actually receive any funds.
  The proposal would provide that the LOSAP's are excluded from the 
provisions of section 457. The result would be deferral of taxation 
until the LOSAP awards are paid. It would also exempt the amounts 
awarded under the LOSAP's from FICA and Medicare payroll taxes. The 
latter provision is similar to other areas of the tax law, such as 
exempting Peace Corp allowances paid to volunteers, as well as other 
plans established by the Government for deferral of compensation.
  The proposal would promote volunteerism in the United States. There 
are strong public policy reasons for promoting volunteerism, and 
programs such as LOSAP's are important in doing this. In many areas of 
the country it is not economically or geographically feasible to 
provide these fire protection and emergency medical services through 
paid career personnel.
  We urge our colleagues to support this sensible and important 
legislation.


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