Dear Friends and Family,

The leaves are turning and fall is in the air. We hope you enjoy the autumn colors and the change in the seasons.

A very important piece of legislation was passed on August 3, 2006: the Pension Protection Act of 2006. This bill is over 900 pages long and addresses a wide range of retirement plan and related issues, with a strong focus on reforming funding and other aspects of defined benefit pension plans. Most of the new provisions will take effect for plan years beginning in 2008. Here are some of the key highlights:

• Permanent extension of 2001 EGTRRA retirement security provisions relating to IRAs, workplace plans, and 529 plans (previously scheduled to expire after 12/31/10)
• Increased limits on 401(k), 403(b), and 457 plan contributions; increased IRA contribution limits; catch-up contributions for individuals aged 50 and older; and higher limits on employee and employer contributions
• Roth provisions now available in 401(k) and other workplace plans
• Higher includable compensation limits
• Permanent tax advantages for 529 college savings plans, allowing for federal income tax-free distributions for qualified higher education expenses

Additionally, the bill permits after-tax rollovers from qualified plans to other qualified plans or to 403(b) plans. It allows direct rollovers to Roth IRAs (after 12/31/2007) from qualified plans, 403(b) plans, and governmental 457(b) plans — eliminating the need for an intermediate rollover to a traditional IRA.

The legislation also allows IRA rollovers to non-spouse beneficiaries from employer-sponsored plans, and permits taxpayers to direct any portion of their tax refund to an IRA starting after 12/31/2006.

An important charitable giving provision allows for tax-free IRA rollovers (up to $100,000) to certain public charities from 1/1/06 through 12/31/07. However, rollovers to donor-advised funds, supporting organizations, and private foundations are not permitted under this rule.

You will be hearing a lot more about the Pension Protection Act of 2006, and we will provide additional information in future cover letters. Please call us if you have any questions about how this may affect you and your family.

Warm regards,

Katz Family Financial