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Letter to TVARS Board

Per TVA’s Office of Inspector General, TVA’s qualified employee pension plan administered by TVARS was only 59 percent funded at the end of fiscal year 2012.  TVA needed to contribute an additional $4.9 Billion to make the pension 100% funded.  TVARS’ funding ratio has declined over the last several years, while the funding ratios of most of TVA’s competitors have significantly improved.  The main cause of this appears to be TVA’s continued reluctance to properly fund the pension.  For example, TVA budgeted $530 million to cover the pension in fiscal year 2012, but contributed none of those funds to its employees’ pension.  However, TVA did give $8 million to the SERP (supplemental executive retirement plan).

All companies in private industry in the United States which have pension plans, including TVA’s major competitors, follow laws established by the Employee Retirement Income Security Act (ERISA) and the Pension Protection Act (PPA).  Under these laws, the contribution each year must include a level amount which would fully amortize the funding shortfall within no more than seven years.  TVARS has been using a much longer amortization period when determining the contribution amount.  This has contributed to the further deterioration of the pension fund.  It should be noted that the contribution amounts established by these laws are minimum amounts.  Many companies contribute more than these minimum amounts.

TVA is not subject to ERISA and PPA, but TVARS board members have the responsibility (fiduciary duty) to act on behalf of the pension plan participants in a way that demonstrates total trust, good faith and honesty.  In order for the TVARS board to be able to fulfill its fiduciary duty, I believe the starting point for negotiations on the contribution should be at least the amount necessary to meet the minimum requirements under ERISA and PPA.   Simply “rubber stamping” TVA’s suggested contribution amount falls seriously short of demonstrating  that the TVARS board is putting forth sufficient effort to meet its fiduciary duty.

Therefore, I believe it would be prudent to determine the fiscal year 2014 contribution that would be required for TVARS to meet the minimum standards set by ERISA and PPA.  I ask again that this contribution amount be included in the board book as part of the funding policy study which we will discuss in the upcoming quarterly board meeting on June 27 and 28.

Thank you,

Leonard

Comments

  1. Is this lack of funding bordering on criminal negligence? It seems it is sounding like it and now they are adding to the problem through their voluntary RIF program.

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  2. Good letter!! I don’t know why TVA is trying to screw the retirees?????

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    1. I think it is all about the money. Using money that should have gone to the pension helps TVA management meet their performance objectives and receive large bonuses. The pension funding problem is never solved, but instead is pushed down the road and continues to grow. ERISA helps prevent this from happening at other companies.

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  3. Hang in there Leonard. Thank you for asking "hard" questions that should prevent the "rubber stamp" positions. Noticed where Les Bays is planning to retire and need a replacement. Keep up your good work--we are listening out in "retirement" land.

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  4. Well said letter, Leonard. I wish the other TVARS board members would join your efforts in pushing this much needed funding. It is the RIGHT thing to do! We retirees appreciate all that you are doing.

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  5. Good Letter Leonard.
    It's too bad the management talks out of both sides of their collective mouths, to wit: they benchmark and try to emulate some practices, but run away from pension funding best practices, then hypocritically fund themselves into retirement glory, apart and away from the real world that the rest of TVA employees/retirees endure.

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