Skip to main content

TVA approves $215 million contribution to address $4.3 Billion pension shortfall

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

Pension

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.

Comments

Popular posts from this blog

A Task Assigned to the TVARS Board

The TVARS board is required to recommend a contribution from TVA to be made in fiscal year 2014 prior to the end of the current fiscal year.  (See Section 9B on pages 51-53 of the rules here .)  Since TVA sets its budget months before the end of the fiscal year, it is imperative that this recommended amount be: decided upon by the TVARS board as quickly as possible; sufficient to adequately fund TVARS; and consistent with the amounts charged to ratepayers for pension expense. All seven TVARS board members have an obligation to come together to accomplish this.  (See TVARS board members here .)  I sincerely hope we will be able to accomplish this without further rule changes suspending TVA contributions, or further claims that legitimate accrued benefits are not really vested and must be reduced.  I hope we will be able to put an end to our failure to insure that amounts paid by TVA ratepayers for pension expense are used for their intended purpose.  As a TVARS board member, I

Introduction

This is my personal blog to facilitate communication among TVA employees, retirees and beneficiaries who are members of TVARS and who wish to preserve their retirement benefits. Please join my site and post your comments.  I have been an elected member of the TVA Retirement System (TVARS, or the system) board of directors since 2003. I am not speaking officially for the TVARS board of directors or TVA management. TVARS is an entity legally independent of TVA. Three of the board members are TVA employees (including myself), three are appointed by TVA management (currently all TVA executive managers), and the seventh is generally a retired TVA employee (appointed by the other six). As TVA employees, we all have a duty of loyalty to carry out directives issued by TVA management in our regular TVA jobs. However, each board member has a fiduciary duty to all the members of the system when performing TVARS duties. This fiduciary duty legally supercedes our duty of loyalty to carry out direct

Why do TVARS board meetings remain closed?

Within the next couple of months, the TVARS board must vote on a contribution amount to recommend that TVA make in fiscal year 2014. In conjunction with the contribution amount, it is possible the vote will include amendments to the rules. In conjunction with the contribution amount in 2009, the rules were amended to: suspend contribution requirements and related actuarial valuations for four years (Section 9B9); suspend the requirement that part of the contribution go to the “excess COLA account,” which was designed to accumulate and grow funds to be used for payment of future COLAs (Sections 9B9, 10D1 and 10D2); and reduce legitimate accrued pension benefits (Sections 6I, 7L and 18C3). The vote in 2009 was not open to observation, and unless the TVARS board takes action, neither will the vote this year. Not one of the six other TVARS board members would second the motion I made in December to open TVARS meetings to observation. All that is required to open future boa