Leonard Muzyn's TVARS Blog

In 2014, TVA funded 100% of its executive pension cost, but less than 50% of its non-executive pension cost. Per TVA’s 2014 10K financial statement : Supplemental Executive Retirement Plan. TVA has established a SERP for certain executives in critical positions to provide supplemental pension benefits tied to compensation that exceeds limits imposed by IRS rules applicable to the qualified defined benefit pension plan. TVA has historically funded the annual calculated expense  (p. 124) TVA contributed $256 million of $517 million in total pension cost, including the executive pension, charged to ratepayers in 2014. (pp. 126, 128)

TVA pension shortfall reaches $4.8B Ed Marcum U.S. Rep. John J. Duncan Jr. has asked the Government Accountability Office to look into TVA’s pension program after utility employees demanded TVA pour money into the fund. Click here to see entire article.

Are you confused by statements made in TVARA meetings that TVA's pension is 79% funded when you see in TVA's annual report that TVA's pension is only 61% funded, much worse than many comparable electric utilities? There are two different accounting standards at play here. Accounting standards used by TVA indicate a 61% funded ratio as of 9/30/14. Accounting standards used in the TVARS annual report indicate a 79% funded ratio as of 9/30/13, the latest information available. Liabilities in the TVARS annual report are discounted at the long-term expected return of the system assets, as they are in reports of public government pensions. William F. Sharpe, one of the recipients of the Nobel Prize in Economics for introducing the capital asset pricing model (CAPM), provided his thinking on pensions and accounting standards in a recently published article in the November/December 2014 Financial Analysts Journal: Are public pensions a problem? You bet. Is this a disaster?...

By  Dave Flessner Friday, December 5, 2014 Employees and retirees of the Tennessee Valley Authority have mounted an online petition campaign to try to convince the federal utility to replenish its underfunded pension program. In their appeal to Congress and the TVA board, petitioners are urging TVA to put more money into the TVA Retirement System, which actuaries estimate has promised $4.8 billion more in benefits than what the fund now has in reserves. Robert Stalvey of Spring City, one of nearly 400 persons who have signed the petition since it began on Monday through the online platform change.com, is worried about his TVA pension. “TVA board members are robbing the funds collected from the rate payers for the pension plan for other funding,” Stalvey complained on the social media site. “This is the same as stealing and should be stopped.” The TVA retirement plan, which covers nearly 36,000 employees, retirees and family members, had assets of $7.5 billion as of Sept. 3...

TVA’s pension plans now have a shortfall of $4.8 billion with a funded ratio of 61 percent. Assets are $7.5 billion and obligations are $12.3 billion. TVA funded $256 million of the $517 million in costs charged to ratepayers in 2014. TVA notes in its 2014 10K financial statement that it has historically funded the cost of the Supplemental Executive Retirement Plan (SERP) component of its pension plans. Beginning in 2015, TVA will begin to charge ratepayers only for its cash contributions to the pension plans and defer pension costs in excess of its cash contributions. Deferred pension costs as of Sept. 30, 2014 total $4.2 billion. TVA classifies deferred pension costs as regulatory assets probable of collection in future rates. Source:   TVA’s 2014 10K financial statement , pages 124–128. Supplemental Executive Retirement Plan. TVA has established a SERP for certain executives in critical positions to provide supplemental pension benefits tied to compensati...

The TVARS board approved a 1.68 percent cost-of-living adjustment (COLA) for eligible retirees and beneficiaries for calendar year 2015. Retirees will see the increase in checks beginning Jan. 31, 2015. The COLA is calculated by comparing the percentage change in the average CPI-U for Nov - Oct compared to the previous Nov - Oct. The board approved a 6 percent interest credit to be applied to employee Cash Balance (CB) amounts for calendar year 2015. The TVARS rules provide for the interest credit to be the change in the CPI-U plus 3 percent, with a minimum rate of 6 percent. The change in the CPI-U was 1.68 percent.  The CB interest credit is one of the ways employees build the value of their pensions while they are working.  That is why it is supposed to be higher than the CPI-U.

December 2, 2014 Dear xxxxxxx: Thank you for contacting me about the Tennessee Valley Authority's employee/retiree pension plans. As I am sure you are aware, the Tennessee Valley Authority (TVA) was established in 1933 to "address a wide range of environmental, economic, and technological issues, including the delivery of low-cost electricity and the management of natural resources" to the people of Tennessee, Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia.(1) As it currently stands, the TVA employs over 12,500 people, generates $10.8 billion in sales revenue, sells 162 billion kilowatts per hour (kwh) of electricity and receives no appropriated federal tax dollars. Daniel Pitts, a TVA retiree, wrote an article for Pensions & Investments where he states that " the Tennessee Valley Authority's pension plan was only 63% funded at the end of its fiscal year September 30, 2013" and that "TVA expects to collect $528 mill...

The recently released minutes of the TVARA August 8, 2014 board meeting contain many good questions about the retirement system. Reproduced below is the section of the meeting minutes that pertains to the retirement system. I added my comments in red. See the complete meeting minutes here . TVA Retirement System Update - (This portion of the minutes have been edited by Pat Brackett, Director, TVA Retirement Management) As of June 30 we had $7.7 billion in assets. The previous 9 months have been up 11.2 percent, but July was down 1 – 1-1/2 percent. By the Retirement System’s books we are 84-85 percent funded. TVA books are approximately 20 points lower. The economy is getting a little stronger. So far it has been a good fiscal year. The TVARS Board met on July 14, and recommended $350 million to be contributed to Retirement in 2015. However, TVA has their own data and they will decide on the amount. This does not explain why TVA has chosen to rely on its own data rather tha...

Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015 IR-2014-99, Oct. 23, 2014 WASHINGTON — The Internal Revenue Service today announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include the following: · The elective deferral (contribution) limit for employees who participate in 401(k) , 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000 . · The catch-up contribution limit for employees aged 50 and over who participate in 401(k) , 403(b), most 457 plans, and the federal government’s Thr...

TVARS board members Jim Hovious and I made it clear to the entire TVARS board, and in separate letters to the court, that we do not oppose the taking of any depositions, including our own.  See the letters and the court orders to file them as part of the record in the case here . Tammy Wilson was TVARS’ executive secretary at the time of the contested 2009 TVARS rule changes.    The October 16, 2014 court order regarding depositions requested by the plaintiffs does the following: Permits the deposition of Tammy Wilson.   Denies the deposition of TVA actuary Towers Watson & Company at this point in time. Determines that the potential information to be gained from taking the depositions of Les Bays, Frank Alford or Tom Kilgore about their meeting five years ago is so minimal that it does not justify the additional time that would be required.  The court order is available here  and is reproduced below. UNITED STATES DISTRICT COURT MIDDLE D...

TVA’s pension costs were $539,000,000 in 2013. The pension costs of TVA employees are part of the costs to operate, maintain and administer TVA’s power properties. TVA collected $539,000,000 from ratepayers to cover those costs in 2013, but made no payment to cover its pension costs for 2013. However, TVA paid $2.4 billion for redemptions and maturities of TVA bonds in 2013. TVA also incurred a $1.4 billion interest expense in 2013, most of which must have been paid to TVA bondholders. These actions by TVA have contributed to the underfunded status of TVARS. It appears that TVA's failure to pay its pension costs is in conflict with the TVA Act and TVA’s 10-k report filed with the Securities and Exchange Commission (SEC). The TVA Act mandates that principal and interest be paid from revenues “after deducting all costs to operate, maintain and administer its power properties.” TVA’s 2013 10-k states that “costs of operating, maintaining, and administering TVA's power pr...

TVARS News Troyani Wins TVARS Board Election In the recent election for a director vacancy on the TVA Retirement System Board, employees voted to re-elect Tony Troyani. His new three-year term will run from Nov. 1, 2014, to Oct. 31, 2017. Of the 4,227 votes cast, Troyani received 2,298 (54.36 percent). Steve Ellis received 1,929 votes (45.64 percent).

Posted By tvatoday On August 25, 2014 @ 10:06 am Employees have until midnight EDT Wednesday, Sept. 3, to cast their ballots in the TVA Retirement System board election. Employees were sent ballots from VR Election Services. For assistance, including a ballot replacement, call 800-218-4026 (Monday-Friday 9:30 a.m. to 6 p.m. EDT). Employees who are TVARS members will elect a director from the two candidates listed below for a three-year term on the TVARS Board. The term will run from November 1, 2014, through October 31, 2017. Steve Ellis  – Facilities Maintenance Technician, Security Installation & Maintenance, Supply Chain & Facilities, Chattanooga Tony Troyani  – Senior Instrument Mechanic Foreman, Power Operations, Cumberland Fossil Plant Click on the names above to view detailed candidate information and campaign statements (if submitted). Campaign statements will be updated weekly throughout the election if a candidate submits an update. VR Elec...

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 cont...

Employees who are TVARS members will elect a director from the two candidates listed below for a three-year term on the TVARS Board. The term will run from November 1, 2014, through October 31, 2017. Steve Ellis – Facilities Maintenance Technician, Security Installation & Maintenance, Supply Chain & Facilities, Chattanooga Tony Troyani – Senior Instrument Mechanic Foreman, Power Operations, Cumberland Fossil Plant Click on the names above to view detailed candidate information and campaign statements (if submitted). Campaign statements will be updated weekly throughout the election if a candidate submits an update. VR Election Services, a leader in the election services industry, will handle the voting process again this year. Election ballots and instructions will be mailed to employees’ home addresses on August 14. Employees will also receive voting information at work by e-mail directly from VR Election Services. The election will be open from August 18-September 3 (24...

On July 14, the TVARS board voted to recommend that TVA contribute $350 million to TVARS in 2015.  Jim Hovious and I supported and voted for this recommendation when it became clear to us that the board was likely to recommend a lower amount without our support.  Per the outdated formula in the TVARS rules, TVA must contribute at least $215 million in 2015.  Changing the minimum contribution formula would require the approval of both the TVARS and TVA boards.

TVA looks for way to replenish underfunded pension plan by   Dave Flessner view bio  »      When President Franklin Roosevelt created the Tennessee Valley Authority in 1933, he wanted TVA to be “a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise.” TVA’s unique status as an independent federally owned corporation helped it capture the power of the Tennessee River and keep power rates relatively low for most of its 81-year history. But some TVA retirees fear that TVA’s independence also now threatens the security of the utility’s retirement program for nearly 36,000 current and retired TVA employees and their families. TVA’s employee retirement fund is more than $4 billion short of what actuaries estimate it should have to pay all the promised future retirement benefits. Although the fund remains one of the biggest in the Southeast and has more than enough money to pay current reti...

Funding Motion On June 20, I moved that the TVARS board adopt the funding policy developed by our actuary which is consistent with the Employee Retirement Income Security Act (ERISA).  This is the funding policy our competitors are legally required to follow. recommend the corresponding contribution of $715 million for 2015. I explained that approving my motion would not require TVA to do anything.  TVA could still contribute less than $715 million.  Efforts to reach a negotiated settlement to the lawsuit would continue. demonstrate that the TVARS board is suggesting a nationally acceptable plan to achieve a financially healthy retirement system. Jim Hovious seconded my motion, but besides the two of us, no other board member expressed support.  Instead, a majority of the board voted to table my motion. Election Update The TVARS board did not change the voting process for the upcoming election.  Nominating petitions can be submitted beginni...

I believe current TVARS board members who were on the board at the time the following occurred still owe TVA employees and retirees answers to the questions below.  Jim Hovious was not on the board at the time the following occurred.  Jim told me that he would have seconded the motions below and that he would not have voted to recommend TVA contribute only $285 million in 2014.  Why leave TVA employees and retirees vulnerable to further COLA benefit reductions, and make it more difficult for their lawsuit to achieve a fair settlement, by refusing to second the motion I made to clarify that the COLAs are vested benefits? Why refuse to second my motion to have open meetings where TVA employees and retirees could observe? Why vote to maintain TVARS' poor financial condition and recommend TVA contribute only $285 million in 2014, thereby enabling the shifting of blame for the system's poor financial condition to the TVARS...

Later this week, prior to the upcoming TVARS board election in a couple months, the TVARS board is scheduled to discuss eliminating run-off elections by adopting instant run-off, or ranked voting.  Why is it that the TVARS board always seems willing to discuss changes to reduce the interaction between board members and the employees and retirees who are counting on them to protect their pensions?  I believe that there needs to be more interaction - not less. I believe current TVARS board members who were on the board at the time the following occurred still owe TVA employees and retirees answers to these questions: Why leave TVA employees and retirees vulnerable to further COLA benefit reductions, and make it more difficult for their lawsuit to achieve a fair settlement, by refusing to second the motion I made to clarify that the COLAs are vested benefits? Why refuse to second my motion to have open meetings where TVA employees and retirees could observe? Why vote to mai...

By Daniel M. Pitts | May 26, 2014 Source:  Pensions & Investments (Click here ) With widespread improvements in pension plan funded levels reported for U.S. corporations, it was alarming to learn the Tennessee Valley Authority's pension plan was only 63% funded at the end of its fiscal year Sept. 30. This funded level puts TVA's pension plan among the worst funded pension plans of major electric utilities in the U.S. The pension plan's current funded status, TVA's reluctance to properly fund it, and the fact that the pension benefits are not guaranteed raise serious questions about the long-term well-being of the pension promise to participants. Upon realizing the critically deficient standing of TVA's pension plan, I reviewed the 10-K financial statements, filed with the Securities and Exchange Commission, of six utilities that compete with TVA: Exelon Corp., Entergy Corp., Duke Energy Corp., American Electric Power Co., Southern Co. and Dominion Resour...

From: Dennis To [mailto:dpto19533@gmail.com] Sent: Thursday, May 08, 2014 12:36 AM To: Dennis To Subject: Special Committee to negotiate for riffed employees on annuity protection If Bill Johnson succeeds in selling TVA, TVARS would mostly likely be transferred to a non-Fed entity.  The rif puts even more burden on the pension system.  The situation is getting quite precarious.  For the new retirees (ie., riffed employees), I think they should form a special committee to negotiate with TVA about how to protect their annuity savings in the event TVA gets sold and the pension system runs out of money.  Such a committee would have a special leverage on their negotiations with TVA.  They know TVA desperately needs the new retirees to leave their annuity savings with TVAR in order to help relieve the cash flow burden in the coming yrs.  If TVA does not cooperate, the committee can threaten to advise the new retirees to transfer their annuity money to...