Committee told federal tax rules complicate adding volunteers to state retirement and health plans

The Emergency Response Services Committee heard detailed legal advice Thursday on whether volunteer firefighters and ambulance personnel could be enrolled in North Dakota's public safety retirement plan or health benefits.

Rebecca Fricke, executive director of the Public Employees Retirement System, told the panel PERS has limited plan options and that adding new groups raises federal tax and coverage issues. "If we hear from an employer group that would like to offer the PERS health insurance, we can only offer them non-grandfathered plans due to ACA requirements," she said.

Federal tax counsel from the firm Ice Miller said the defining issue is whether the entity employing the responders qualifies as a "governmental employer" under Internal Revenue Code principles and IRS guidance. Audra Ferguson and Lisa Harrison briefed the committee on the IRS factor test and Revenue Ruling 89-49, which examine control of a governing body, fiscal responsibility, enabling law and similar factors. "It's a fact-specific factor analysis," Ferguson said, adding that "private ambulance services are unlikely to satisfy most of the factors," while volunteer fire departments may, on an individual basis.

Counsel warned the committee of two separate but related risks: losing qualified governmental plan status for pensions, and triggering ERISA and state insurance regulation for health plans. Chris Sears of Ice Miller said the consequences for pension plans can be "very drastic" and for health plans can require ERISA compliance, formal plan documents, additional reporting and possible oversight by the Department of Labor.

As an alternative, presenters discussed Length of Service Award Programs (LOSAPs), which are a form of deferred compensation designed for bona fide volunteers and carry specific limits (for example, an aggregate annual award cap of $6,000 under current federal rules). Counsel also cited the Montana LOSAP example, in which a volunteer firefighter vests over 10'30 years and can receive a defined amount (the packet cited $200 per month at age 60 for 20 years of service under that state's design).

Committee members requested follow-up analyses on which North Dakota volunteer organizations would meet IRS factors and whether a limited pilot or targeted legislative language could expand participation without jeopardizing plan status. "If there's a small subpopulation you want us to take an initial look at," one counsel said, "we could do that as well."

The committee did not take immediate action on benefit design; staff and counsel will return with more specific, employer-by-employer analyses before any bill drafting.