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To:        All Fire Fighter Pension Fund Members
From:    Bill Stefka, Administrator
Date:     December 28, 2007
Re:        COLA Information/Benevolent Fund/ HELPS Instructions/DROP Example

Dear Retirees:

For the year of 2007 we have lost the following firefighters, retirees, and surviving spouses:

Name Date Deceased Benevolent Fund? Spouse/Or Survivor?
Keith L. Wampler (33) 2/18/07 Yes N/A
Guillermo (Benny) Balderrama (32) 3/2/07 Yes N/A
Odell W. Jantzen (78) 3/14/07 No Yes/Nora
Granville Leroy Petty (79) 7/5/07 Yes Yes/Louella
Bonnye Priddy (Widow of Tom) 8/25/07 N/A N/A
Jewel Euzede Sappington
(Widow of Gene Sappington)
11/5/07 N/A N/A
Leora Schreiber (Widow of Arthur) 11/26/07 N/A N/A
Jack R. Williams (89) 12/6/07 Yes N/A

Mr. Wampler and Balderrama were active firefighters with 8 and 4 years of service in the department respectively. We are told you can send your benevolent fund payments to the Union Office: Local 975, 7537 Cameron Rd., Austin, TX 78752. Please contact Eric Pederson on his cell phone at (512) 922-4332 with any benevolent fund questions you may have.

At the December board meeting, our actuary said we would not be able to approve a COLA for 2008 since our fund is still not where it needs to be financially. A number of retirees attended this meeting and expressed their concerns about the need for COLA's and the need to get some changes made in the next legislature. A special actuarial study was approved to be conducted which will show what funding levels will be needed to afford COLA's in the future under various scenarios for our retirees. This study will be in addition to the biennial actuarial valuation as of December 31, 2007, which will begin in early 2008.

The Healthcare Enhancement for Local Public Safety (HELPS) benefit was part of the Pension Protection Act of 2006. Starting with your upcoming 2007 tax returns, the IRS will allow retired firefighters to exclude up to a maximum of $3,000 in insurance premiums made from your eligible retirement plan (which we are, under the category of qualified trust) that is used to pay for accident or health insurance or long term care insurance. The premiums can be for you, your spouse, or dependents. IRS instructions mention that the distribution must be made directly from the plan to your insurance provider. In other words, the medical (and dental) insurance you have deducted each month and sent in by us to companies such as United Healthcare and Blue Cross/Blue Shield in your behalf will qualify (but only up to a maximum of $3,000).

The amount excluded from your income cannot be used to also claim a medical expense deduction elsewhere on your tax return. Please remember your 1099-R's will not automatically reflect this exclusion (in box 2a). You need to take this deduction (if any is applicable) on your tax return yourself. You can refer to your December "check stub" (the month -end statements you receive from State Street) giving monthly and year-to-date totals of your pension income and deductions to get this insurance premium information. Depending on which tax form you file, you will need to report your total pension income on: for Form 1040, line 16a; for Form 1040A, line 12a; or for Form 1040NR, line 17a. You then report the taxable amount (after you deduct or exclude the appropriate amount of insurance premiums) on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. You need to enter "PSO" next to the appropriate line on which you report the taxable amount. These instructions are provided by the IRS in Publication 575 and we strongly advise you consult with your tax advisor before completing your tax return with any questions you may have. The following link has also been provided to assist with these instructions:

At an earlier pension board meeting, it was requested by several retirees to furnish everyone an example of a DROP pension benefit. There was some discussion about how the DROP (Deferred Retirement Option Plan) worked, how it is "cost-neutral" to the pension fund and whether it is costing the plan money, and to give an example of such. The actuaries have explained that the DROP, which is a benefit design feature started in 1995, can allow a firefighter to receive more funds up front in the form of a lump sum, but in exchange for a lesser monthly pension than they would have otherwise received if they had taken a standard retirement. The actuaries explain that each retirement case is different, but as an overall cost item to the fund, over time the DROP is a "wash" or cost-neutral as designed for our plan.

Don't forget, starting the second Wednesday in January '08, the location for the retiree breakfast group has changed to the IHOP restaurant at Bee Caves Rd. and Mopac. (1101 S. Mopac - Phone 327-9284) This will be the new location until further word. Contact Charley Casey at 576-1642 with questions.

Becky Brooks and Danny Stamper have invited our retirees to "get connected" by sharing e-mail addresses and keeping current on pension and related issues. Send your e-mail address to Becky Brooks at: or send your house address to: Danny Stamper, 401 Autumn Ln., Dripping Springs, TX 78620.

Our pension board and staff want to wish you a Safe and Happy New Year!


William E. Stefka