Included in TVA’s fiscal year 2015 budget approved by the TVA Board this week was a $215 million contribution to TVARS. TVA’s CEO was also given the discretion to contribute up to an additional $60 million. Per the TVA press briefing excerpt below, funding the pension is “one of several issues TVA must manage as it balances the interests of plan participants, our customers and the overall financial condition of TVA.” TVA notes that a 63 percent funded system with a $4.3 Billion shortfall, “is an improvement over last year, when the system was funded at 59 percent.”
TVA did not address why pension funding continues to be withheld even as funds are collected from ratepayers to specifically cover pension costs. Based on information received by TVA retiree Dan Pitts from TVA through a Freedom of Information Act request, TVA expects to collect $528 million from its ratepayers in the current fiscal year specifically to cover pension costs, but plans to contribute only $250,000,000 to the pension. TVA collected $539 million in fiscal year 2013 and $530 million in fiscal year 2012, but contributed none of these funds to TVARS.
TVA also did not explain how TVA remains in compliance with the part of the TVA Act that spells out what costs have priority over bond payments. The Act specifies that Operating, Maintenance and Administrative costs (which include pension costs) have priority over TVA's bond payments and that bonds are to be paid only after costs of operating, maintaining, and administering the electric system are paid.
Press Briefing Q&A
TVA Board of Directors Meeting
August 21, 2014
What is the status of TVA’s pension plan?
TVA is committed to meeting its obligation to the TVA Retirement System. With the prolonged slow recovery of the economy and changing demographics, the TVA Retirement System is facing financial pressure, like many other retirement systems across the nation. The system was 63 percent funded at the end of fiscal year 2013. This is an improvement over last year, when the system was funded at 59 percent.
Pension funding is one of several issues TVA must manage as it balances the interests of plan participants, our customers and the overall financial condition of TVA. TVA expects to contribute $250 million total to the pension this year, half of which was contributed in the second quarter.
Didn’t TVA recently make changes to its pension plan?
Employees hired after June 30, 2014, will be participating in a new defined contribution retirement plan. Under this plan, TVA will make contributions to the employee’s 401K plan in addition to matching 75 percent of the first 6 percent of the employee’s own contributions. This continues to provide a competitive retirement option that allows TVA to more effectively manage their future liabilities.
Employees hired before July 1 are unaffected by this change.