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To:        All Fire Fighter Pension Fund Members
From:    Bill Stefka, Administrator
Date:     December 27, 2010
Re:        COLA Update/Benevolent Fund/HELPS Instructions/Thank You's

Dear Pension Fund Members:

The pension board was informed at the December meeting that the actuary could not recommend any type of COLA since the market value of the fund is not where it should be. The market value of the plan was approximately $600 million at the end of 2007 and currently stands at about $580 million. Even with a positive return in 2009 of about 15% and for 2010 about 10%, the effect of the market downturn in 2008 (-23%) is still weighing on the plan.

For the good news, there is an additional 4% in pension contributions from the city which has been approved through bargaining negotiations with the firefighters and the city. This additional funding has already begun in 1% increments started in October 2010 and continuing through 2013. With this increase being phased in, the overall contribution rate from the city will increase from 18.05% to 22.05%.

In addition, the firefighters recently approved increasing their pension contribution by an additional 3%, from 15.70% to a total of 18.70%, being phased in through % increments over 6 years starting in October 2011. This combined 7% increase in contributions from the city and the firefighters will bring the total contribution level from 33.75% to 40.75% of pay. Although the plan is directly affected by the financial markets' volatility, these steps should prove to be beneficial for both our active and retired plan participants in making a good plan even better.

We regret that for the year of 2010 we have lost the following retired firefighters and widows:

Name Date Deceased Benevolent Fund? Spouse/Or Survivor?
Charles B. Perkins 2/2/10 Yes Yes/Mary Louise
William L. McDonald (89)4/15/10YesYes/Beth
Richard K. Knowlton5/1/10YesYes/Kristina(child)
Joe W. Pearson6/29/10Yes Yes/Nina
Garry A. Brown7/29/10NoYes/Michael(child)
James W. Shelton8/25/10 YesYes/Emma
Patsy Raymond (Widow of Frankie Raymond)9/26/10N/AN/A
Erma Wilson (Widow of Willie S. Wilson)11/19/10N/AN/A

A flier is also enclosed from the benevolent fund folks to update everyone on what's going on with their committee and that the dues assessment will remain the same going into 2011.

Don't forget the HELPS (Healthcare Enhancement for Local Public Safety) deduction of up to $3,000 annually. The IRS allows retired firefighters to exclude up to a maximum of $3,000 in medical and/or dental insurance premiums which are deducted directly from your retirement checks. This includes any insurance including amounts paid for beneficiaries as well. Please remember your 1099R's will not automatically reflect this exclusion. The instructions for taking this exclusion will probably be in Publication 575 or directly in the 1040 instructions and we strongly advise you consult with your tax advisor before completing your tax return with any questions you have.

We would like to take this time to say THANKS! to Randy Aylieff who is stepping down from the pension board after serving 15 years. The plan has grown from about $230 million to $580 million (150%) during that time and that is including the past so called "lost decade" (in the financial markets) we have all experienced. We appreciate all the work Randy has done for us since joining the board in 1995! Jeremy Burke has recently been elected as pension board trustee and we welcome him on board as well!

We also want to thank Delbert Cain who has been President of the Austin Retired Fire Fighters Association (ARFFA) since its inception. We understand that Delbert may turn over his duties to retired firefighter Don Smith next month, but has agreed to continue with ARFFA as a Vice President. Delbert has helped get this organization off the ground and I know his fellow retirees join me in thanking him for the work he has done. It is important to have a collective voice representing the retirees such as ARFFA and we need their support as well as our Local 975 and the City of Austin when going to the legislature in 2011 to codify the increase in contributions.

We hope you have enjoyed the holidays and we wish you the best as we enter the new-year!

Sincerely,

William E. Stefka
Administrator