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Muzyn Statement for Inclusion in TVARS May 9, 2016 Meeting Minutes

Our actuary expressed five key concerns with the funding policy in TVA’s April 18, 2016 proposal.  These concerns were included in a written report to TVARS and are applicable to what the board approved in the May 9, 2016 meeting.  Board members owe a fiduciary duty to the beneficiaries of the system to act in their best interest independent of TVA.  Therefore, as a TVARS board member, I had no choice but to vote against this proposal.  This proposal may help TVA executives meet their goals and receive larger bonuses, but it exposes beneficiaries to these five very serious concerns.  I am ashamed to be associated with this board whose majority so clearly demonstrates that they place their own career advancements and financial securities above the duties required of them as members of this board.  This is a summary of the five key concerns expressed by our actuary about the proposal:

  • It is not clear if participants or TVA are bearing the investment risk if the return on risky assets does not meet the 7% expectation, but someone is bearing that several billion dollar risk.
  • There is a substantial risk that needed increases in the minimum contribution formula will not take place rapidly enough due to the continued 30-year rolling amortization of the unfunded liability.  Meaningful contributions to the plan would then be required at a time when few, if any, active participants remain in the plan.  Generational tension between plan participants and the then current TVA employees could occur to the extent future resources to pay both compensation and benefits are limited.
  • If TVA for whatever reason ceases to contribute and the plan has to be settled, there would not be enough assets to settle the plan’s obligations unless this occurs in the far distant future after many of the current participants have died.
  • By proposing a power of “review and agreement” over asset allocations, TVA limits TVARS’ ability to manage risks and participant benefit security.
  • It does not include any provisions to more rapidly fund the increase in the deficit related to making lump sum payments.  Offering to pay lump sums results in a faster depletion of fund assets and introduces additional volatility in contribution requirements which may not be easily recovered under current rules’ 30-year amortization.

Comments

  1. UnknownMay 12, 2016 at 11:11 PM

    I appreciate you standing your ground. Amidst all of the greed that goes into destroying a long time retirement system, it's good to have a representative, no matter how little your voice may or may not carry, who will say what needs to be said.

    ReplyDelete

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