Troy Restructures Volunteer Firefighter Incentive Plan
Troy's more than 100 volunteers will move to a nominal annual benefit when the new plan takes effect Jan. 1, 2027.
Updated on Nov. 4, 2026 in Philanthropy
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Troy City Council adopted a new Volunteer Firefighter Incentive Plan on Oct. 5, which takes effect Jan. 1, 2027, replacing a prior plan the IRS found exceeded what a tax-exempt Length of Service Award Program allows. Its more than 100 volunteers across six fire stations are the affected group.
Why it matters
The IRS ruling forced the city to close its prior plan in 2023 and rebuild the incentive structure around tax rules, replacing tiered lump-sum payments with a nominal annual benefit. For Troy, the change alters how volunteer retention is funded and how past service is credited.
The Troy Fire Department has more than 100 volunteers staffing six fire stations, and the plan recognizes volunteers with 25 years of continuous service. The city has offered a volunteer incentive plan since 1979, with the new plan replacing the lump-sum structure that the IRS ruled exceeded tax-exempt limits.
The players
Troy City Council
The elected governing body of the city of Troy that adopted the plan and oversees city-run volunteer firefighting programs.
Troy Fire Department
The municipal fire department operating six stations staffed in part by more than 100 certified volunteers.
Volunteer Firefighters Incentive Committee
The volunteer-led committee that negotiated the new plan terms with the city.
Internal Revenue Service
The federal tax agency that ruled the prior plan's benefits exceeded tax-exempt Length of Service Award Program limits.
The details
The IRS ruled that the prior plan's benefits exceeded what a tax-exempt Length of Service Award Program allows, and efforts to challenge that ruling failed. The city closed the prior plan in 2023 and created a replacement that complies with IRS rules and the Fair Labor Standards Act, developed through talks with the Volunteer Firefighters Incentive Committee and informed by a survey of volunteers' needs. Accrued benefits and service credit carry over to the new plan, and volunteers who reached 25 years of continuous service by May 1, 2025 will be recognized through individual agreements.
Timeline
2012: City began developing a tax-exempt trust with volunteers
1979: City first offered a volunteer incentive plan
2023: City closed the prior plan and created an IRS-compliant plan
May 1, 2025: Deadline for 25-year continuous service recognition eligibility
Jan. 1, 2027: New Volunteer Firefighter Incentive Plan takes effect
Market Landscape
Troy's redesign falls under the same IRS limits on tax-exempt Length of Service Award Programs that shaped the prior plan's closure. The change shows how municipal volunteer incentive programs must align with federal tax rules when structuring benefits.
Volunteer firefighter programs that use tax-exempt structures should review whether their benefit levels fit IRS Length of Service Award Program limits before setting new terms. Municipal finance and human resources staff should track the Jan. 1, 2027 effective date and confirm how accrued service credit transfers under any revised plan.
The takeaway
Any municipal incentive plan tied to tax-exempt status needs an IRS compliance review before benefits are set, since the prior Troy plan was struck down on that basis. Track the Jan. 1, 2027 transition and confirm how accrued benefits and service credit carry into the new structure with qualified counsel or an accountant.
Further reading
Explore more Philanthropy coverage to see how volunteer and community-funded programs are structured.
More information
Find the city's official details at Troy city information.
Source note: This article includes information reported by West Bloomfield Beacon.
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