News

                                      TIMELY ISSUES 2006-2007

1. Dollar Limits for 2006 and 2007- The annual limitations for 401(k) elective contributions, profit sharing plan
contributions and compensation which can be used for retirement plan purposes are as follows:

Year                        401(k) (under age 50 )                          401(k)(age 50 or more)

2006                              $15,000                                                       $20,000
2007                              $15,500                                                       $20,500

Year                     SIMPLE 401(k) (under age 50 )          SIMPLE 401(k)(age 50 or more)

2006                              $10,000                                                        $12,500
2007                              $10,500                                                        $13,000

Year                        Profit Sharing                                              Compensation

2006                             *$44,000                                                    $220,000
2007                             *$45,000                                                    $225,000

* It should be noted that (i) the “Profit Sharing” figures above include any 401(k) deferrals made by a participant, and
(ii) for those age 50 or over who participate in a 401(k) profit sharing plan, the annual limit for 2006 is $49,000 and
for 2007 is $50,000.

2. Loan Repayments- Participant loans are generally repaid through payroll withholding. It is very important that
these repayments be deposited timely into the plan by the plan trustees. The deadline for this purpose is generally
the same as the deadline to deposit 401(k) contributions withheld from pay. Both 401(k) deferral contributions and
loan repayments must be deposited into the plan no later than the 15th business day following the end of the month
in which the amounts were withheld from pay.

3. Plan Distributions- It is important that employers do not permit distributions to be made to participants without
the input of Heller Pension Associates, Inc. Employers should contact us if any participant requests a distribution of
his or her plan benefits.   There are many rules to be followed with regard to plan distributions. One such rule that
poses a financial danger to the employer involves federal withholding taxes. If a participant elects to receive a
distribution of his or her plan benefits (instead of a rollover), in most cases 20% of the value of participant's account
must be withheld and sent to the Internal Revenue Service (IRS). The participant receives the remaining 80% of the
value of his or her account. If the 20% is not withheld and sent to the IRS, the liability for the 20% withholding tax
falls on the employer. For example, if a participant who has an account worth $75,000 requests and receives a
distribution of the entire account and no tax is withheld by the employer, then the employer is liable to pay the IRS
$15,000 in taxes.

4. Quarterly Benefit Statements- Pursuant to the Pension Protection Act (PPA), commencing in 2007, defined
contribution plans (including 401(k) and profit sharing plans), which allow for participant-directed investments, will
have to provide participants with quarterly benefit statements. Such statements will have to provide participants (i)
information regarding their accrued benefits under the plan, (ii) information regarding their vested benefits under the
plan, (iii) a written explanation of permitted disparity (social security integration) if applicable, (iv) the value of each
investment to which assets in the participant’s account have been allocated, (v) a written explanation of any
restrictions on the participant’s right to direct the investment of their account under the plan, (vi) a written
explanation of the importance of creating a well-balanced and diversified portfolio, and (vii) a note directing the
participant to the Department of Labor (DOL) website for more information on investing and diversification.   It
appears the financial information required to be provided can be based upon the most recent valuation which has
been completed. Defined contribution plans which do not provide for participant-directed investments must provide
annual benefit statements.   We currently provide these statements to all sponsors of defined contribution plans.
However, commencing in 2007, additional information regarding permitted disparity (if applicable), and the value of
each investment to which assets in a participant's account have been allocated must also be included in such
statements. In either case of quarterly or annual required statements, we will prepare and provide these statements
to all plan sponsors.

5. Non-Spousal Rollovers- Pursuant to the PPA, commencing in 2007, plan benefits payable to a non-spouse
beneficiary after the death of a participant can now be transferred directly to an IRA account. (These types of
transfers were previously only permitted to be made to spousal beneficiaries.) The IRA account will be treated as an
inherited IRA (as if the beneficiary had inherited an IRA account upon the IRA owner’s death), and distributions from
the IRA account are subject to the rules applicable to beneficiaries of an IRA.

6. ROTH 401(k) Contributions- Commencing in 2006, if so elected by the plan sponsor in the plan document, 401
(k) plan participants may designate all or a portion of their 401(k) deferral contributions as ROTH 401(k)
contributions. Any amount so elected by a participant is includable in income for federal, state and local income tax
purposes (unlike a regular 401(k) contribution, which are made pre-tax). However, at the time a participant receives
a distribution of ROTH 401(k) contributions and income from the plan, such distribution may not be includable in
gross income for federal, state and local income tax purposes, whereas distributions from non-ROTH plans are
subject to such taxation.   This exemption from income tax is effective if the distribution is "qualified." The distribution
is qualified if it occurs due to death, disability or attainment of age 59 ½. It also must be made no sooner than the
fifth calendar year following the calendar year of the participant's first ROTH 401(k) contribution.   Normally the
determining factor in measuring which type of contribution (regular 401(k) or ROTH 401(k)) is more financially
favorable to an individual is the individual's income tax rate at the time of the contribution versus the income tax rate
at the time of distribution from the plan. A regular 401(k) contribution is generally more financially favorable for an
individual whose tax rate is higher at the time of the contribution than at the time of distribution. A ROTH 401(k)
contribution is generally more favorable for an individual whose income tax rate will be higher at the time of
distribution than at the time of contribution.

7. Time Frame for Plan Distributions- In the case of plan distributions which exceed $5,000, the plan cannot
distribute benefits to a participant without his or her consent. This consent is not valid unless the participant has
received a notice from the plan which provides certain required information. Such information was required to be
supplied no less than 30 and no more than 90 days prior to providing the participant with the distribution. Pursuant
to the PPA, effective in 2007, the 90-day period is extended to 180 days.

8. Qualified Default Investment Alternatives (QDIAs)- Pursuant to the PPA and new DOL Regulations, plan
trustees can be protected from liability in cases in which plan participants who have the right to direct the
investments in their account fail to do so. The plan trustees can avoid liability by simply investing the proceeds of
any such participant’s account in either a “balanced fund” (including equities and fixed income investments) or a “life-
cycle” fund. The plan must provide the participant with a notice at least 30 days prior to the investment, and at least
30 days in advance of each subsequent plan year. The notice must include (i) a description of the circumstances
under which assets in the participant’s account may be invested in the QDIA, (ii) a description of the QDIA’s
investment objectives, return-risk characteristics, and fees and other expenses, (iii) a description of how the
participant can transfer (at no financial penalty) the portion of the participant’s account held in the QDIA to one or
more of the investment alternatives available to participants who wish to direct the investment of their account, and
(iv) a description of where the participant can obtain information regarding the investment alternatives available
under the plan. We will provide the QDIA notice to all plan sponsors that are affected by this requirement.