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To:         Pension Recipients
From:     Bill Stefka
Date:      October 19, 2006
Re:         Important News About "HELPS"/The Pension Protection Act Of 2006! / 2005 Annual Report/General Update

Dear Retirees:

Since our last update on March 31, 2006 we have lost the following:

Retirees’                                 Date                            Benevolent      Spouse/Or      
Name                                       Deceased                    Fund?              Survivior?                              
Curtis Rowland (93)                  April 14, 2006                Yes                  Yes/Jesse
Tom Priddy (90)                        June 27, 2006                Yes                  Yes/Bonnye
Willie Ray Davis (82)                 July 3, 2006                    No                  Yes/Aldene
Carolyn Schafer (Predeceased   July 15, 2006                 N/A                  N/A
 by retiree Andy Schafer)
Odean Puryear (76)                   October 2, 2006             Yes                 Yes/Alice Mae
Joe Allen (83)                            October 10, 2006           Yes                 Yes/Dell

You may contact Eric Pederson at Fire St.14A (512)974-4164 or (512)922-4332 (Cell), to update your benevolent fund payments.

Enclosed is your 2005 Annual Report. If you have any questions about the report, please contact our office or one of your board trustees.

Have you heard about “HELPS”? This can provide some tax relief for our retirees! It stands for the Healthcare Enhancement For Local Public Safety Retirees Act. It is a key provision of the Pension Protection Act of 2006 which was effective August 17, 2006. Starting in January 2007, it will provide up to $3,000 annually on a pre-tax basis to retired public safety officers (who retired under “normal” retirement) and their dependents for use toward health care insurance. The way it works is: assume your taxable pension income is $30,000 next year. You can reduce that taxable income by the amount of your health insurance premiums (up to a maximum amount of $3,000). So if your health insurance premiums do reach $3,000 for the year 2007, your reportable taxable pension income on the 1099-R for that year will only reflect $27,000 rather than the full $30,000.

Enrollment for this program will be necessary to participate. The enrollment and forms for this process will be handled directly through our pension office. Enrollment forms will be mailed to all eligible retirees in about 45 days in order to respond and implement this process. We have been waiting for some clarification from the IRS on some key related issues, but we wanted everyone to know about this opportunity and that we will be keeping you posted as we go along.

Another key provision of the Pension Protection Act of 2006 concerns changes in the early distribution rules for public safety officers. The retirement age has been lowered from 55 to 50 for eligibility to receive (10%) penalty-free distributions from your plan. Formerly a firefighter had to have retired at age 55 to receive a penalty-free distribution from their pension fund. That age requirement has now been lowered to age 50. This applies to future and currently retired firefighters as well. So if a current retiree terminated their service at an age before 55 but was at least 50 when retired, they are now eligible for a lump sum distribution penalty-free in certain instances.

Want more good news? Unless you already have received your packet, you soon should hear from the City of Austin about the medical insurance for 2007. The medical rates are actually going down in some instances. You will be updated on all of the medical and dental insurance coverage during the City of Austin’s upcoming open enrollment process.

Want to be on an e-mail buddy list? If you would like to be an e-mail contact (buddy) who we can send a quick e-mail to and help get word out to others about fellow retirees passing away and other important matters, please contact our office. Our e-mail address is: afdpension@austin.rr.com. should you be interested. Our website address is AFRS.ORG, which can be read for updates as well.

Our Local 975 has asked any retirees who a few years ago may have made payments by check to or through the Union for supplemental life insurance, rather than through payroll deductions, that they please contact their Local 975 offices at (512) 441-7572.

We hope you are all doing well and if you are ever in our area, please stop by! If you have any questions or concerns, please do not hesitate to let us know.

Sincerely,

William E. Stefka
Administrator