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Annual TVARS Update

I would first like to take this opportunity to wish all TVARS beneficiaries a wonderful Christmas. All the best in 2020!

The following 2020 COLA, interest crediting rates, and IRS contribution limits were reported by TVARS. The following financial update was based on TVA regulatory filings and reporting by Dave Flessner, Business Editor of the Chattanooga Times Free Press. 

Cost-of-living adjustment (COLA) for 2020

For 2020, the COLA for eligible retirees and beneficiaries will be 1.54 percent.

TVARS Rules and Regulations provide that eligible retirement benefits (pension and supplemental benefits) will receive a COLA based on an inflation measure, which is the Consumer Price Index — All Urban Consumers (CPI-U) — an index maintained by the U.S. Labor Department that measures the price changes in a broad group of various goods and services purchased by consumers. Under TVARS Rules, the COLA is calculated as the percentage change in the average CPI-U for the period of November 2017 – October 2018 to the period November 2018 – October 2019 (1.79 percent) minus 0.25 percent. Eligible retirees and beneficiaries will see the increase in checks beginning Jan. 31, 2020.

Interest Crediting Rates for 2020

Cash balance (pension) accounts receive interest credits on a monthly basis and Fixed Fund (annuity) accounts receive interest credits on a daily basis. These interest crediting rates are set for each calendar year according to the TVARS Rules.

For employees with cash balance accounts who were hired prior to Jan. 1, 1996, the interest rate for 2020 will be 6 percent — the calculation is equal to the change in the CPI-U (1.79 percent) plus 3 percent but not less than 6 percent.

For employees with cash balance accounts who were hired on or after Jan. 1, 1996, the interest rate for 2020 will be 4.75 percent — the calculation is equal to the change in the CPI-U (1.79 percent) plus 2 percent but not less than the TVARS assumed rate of investment return (6.75 percent) minus 2 percent.

For Fixed Fund accounts, the interest rate for 2020 will be 4.75 percent — the calculation is equal to the change in the CPI-U (1.79%) plus 2% but not less than the TVARS assumed rate of investment return (6.75 percent) minus 2 percent.

IRS contribution limits for 2020

During 2020, employees will be able to contribute up to $19,500 to the 401(k) plan on a pre-tax or Roth basis, which is a $500 increase from 2019. Employees who are age 50 or older at any time during 2020 may make additional “catch-up” contributions to the 401(k) plan of up to $6,500 over the $19,500 limit on a pre-tax or Roth basis, which is a $500 increase from 2019.

The overall contribution limit to the 401(k) plan and the TVARS fixed and variable (annuity) funds for 2020 will be $57,000, which is a $1,000 increase from 2019. This overall limit includes the following contributions: (i) employee pre-tax, Roth, and after-tax contributions to the 401(k) plan; (ii) TVA’s matching and non-elective (automatic) contributions to the 401(k) plan; and (iii) employee after-tax contributions to the TVARS fixed and variable (annuity) funds (subject to a separate $10,000 limit) for employees hired before Jan. 1, 1996, who are eligible to contribute to those funds. Any “catch-up” contributions made by employees age 50 or older to the 401(k) plan do not count toward the overall contribution limit of $57,000.

Financial Update

As reported by Dave Flessner in the Chattanooga Times Free Press, TVA disclosed in regulatory filings that TVARS had a pension shortfall of $5.33 billion and a funded ratio of 60% at the end of fiscal year 2019. Note that this differs from calculations reported by TVARS which use a higher assumed rate of future investment returns. Dave Flessner reported that TVA's unfunded liabilities grew by about $1.6 billion during the year, which equaled the amount by which TVA paid down its other debt. Lower interest rates contributed to the growth in the unfunded liabilities this past year. TVARS investments had positive returns. TVARS Executive Secretary Mark Meigs stated "all retirement benefits will be made to them (retirees and beneficiaries) in the future."


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