PFFPNC UPDATE

Legislative Report from David R. Anders, President 

Fire Fighter and EMS Special Separation Allowance:  During the 2009 legislative session, PFFPNC lobbyists have been working on SB 908, the Special Separation Allowance for Fire and EMS.  According to Buck Consultants and Hartman and Associates, the cost is less than other retirement bills that have been introduced for fire fighters this session.  Buck estimates the cost of the statewide retirement plan at $2.0 Million the second year and $5.7 million the fifth year while Hartman and Associates estimate the cost at $1.7 the second year and $4.3 the fifth year.   

The two separate ½  cent sales tax increases in the mid 1980’s (currently $1.2 Billion) was to pay for law enforcement’s Separation Allowance and 401(k) and in 2008 is currently over three times what it cost for both law enforcement retirement programs in some cities and over five times in other cities.  For example, the City of Charlotte currently collects over $25.7 million from the two ½ cent sales tax increases and their cost for law enforcement Separation Allowance and 401(k) is $8.1 million.  The City of Asheville collects over $5.8 million and they pay out $0.8 million which is less than one fifth of what they collect. Statewide, the number of fire fighters and EMS personnel that would be affected by SB 908 is less than half that of law enforcement and the bill is asking for only the Separation Allowance.   

The difficulty of moving the legislation has not been a surprise.  Even with the cities and counties receiving more than three times the money they need to finance law enforcement’s Separation Allowance and 401(k), the economic downturn has lawmakers nervous.  Legislators have been struggling with proposals of finding new revenues through tax increases to make up for some of the $4.7 Billion short fall which is like deciding which political poison they should drink.  PFFPNC Lobbyists will continue the work through the end of the session.  SB 908 will also be alive during the 2010 short session. 

Fire and Rescue Pension Fund Contributions Withdrawal:  PFFPNC Lobbyists were able to assist Rep. David Lewis with the Fire and Rescue Pension Withdrawal (HB 1073).  A number of fire fighters who had changed departments complained that their old employer (department) withdrew their Fire and Rescue Pension contributions, some of which they paid themselves.  As a result, at their new employment, the fire fighter had to start from day one with no years of credit in the system.  The committee’s discussion was what should be done with contributions made by the Department on the behalf of the employee. 

The PFFPNC spoke in committee and explained that whether or not the employee is a volunteer or career, any contributions to the pension fund by the department is considered as compensation for their service to the department.  We were asked by the Committee Chair to meet with Rep. Lewis, Legislative Fiscal Research, Stanley Moore, and NCSFA Lobbyist Fred Bone and work out language that would be satisfactory.   It is our opinion the courts would take a dim view of the employer reneging on any type of compensation for services rendered. The bill’s language specifies that the money paid to the Retirement System by employers would be paid back to the employee only after five years of service prior to leaving the department.  The Bill was withdrawn from the Senate Calendar on July 1 and placed on the Calendar for the 8^th.  It is unlikely but also unclear if any senators have plans to amend the bill again.  

The North Carolina Sheriff’s Association Tries Last Minute End Run:  On Wednesday, June 24, the North Carolina Sheriff’s Association tried to attach an amendment to SB 389, Housing Authority Retirement for Charlotte and Robeson County, to place their Association’s employees as members of the Local Government Employees Retirement System.  None of the organizations watching pension issues this session saw this coming.  The PFFPNC spoke in opposition to the amendment as well as did Ed Regan, lobbyist for the NC Retired Governmental Employees Association.   

In years past, the Legislative Research Division, the Retirement Division and the Attorney General have all issued opinions that adding non-public employees to the System would disqualify the System as tax exempt.  This issue has surfaced several times due to paid fire fighters in combination departments, managed by a Board of Directors, being included in the Local Government Employees Retirement System.  Each time the IRS has warned the NC Treasury Department that if this continues, LGERS will no longer be a tax exempt system.  This would cost current employees in the System millions of dollars in tax money they are currently exempt from.   

Lobbyist and the Association’s Director, Eddie Caldwell, brought with him the Sherriff’s Tax Attorney to testify that adding the Sherriff’s Association employees to LGERS was legal.  His argument was the sheriffs were constitutional officers of the state and since their Association’s employees were working for sheriffs, this made them different in the eyes of the IRS.  Plus, he stated that if this were not the case, ten employees would not be noticed by the IRS.  

The PFFPNC’s argument before the Committee considering the amendment was that this was like rolling the dice and until the IRS said that it was legal, legislators it should reject the proposal.  The Pension Committee’s vote was 4 to 4 causing the amendment to fail.