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TVARS' Poor Funded Status


Inadequate contributions from TVA continue to be the primary cause of TVARS’ poor funded status. TVA’s contributions to TVARS have not kept pace with TVA’s pension expense. They have also not kept pace with TVA’s contributions on behalf of TVA employees covered by the Federal Employee Retirement System (FERS), including TVA Board members.

TVARS’ investment performance has been very good. As of December 31, 2013, TVARS’ investment performance benchmarked against a universe of over 800 pension funds was top decile for the past three years, top quartile for the past ten years, and 28th percentile for the past 20 years with an annualized investment return of 8.4% net of fees.

TVA retiree benefits are not excessive. Prior to the 2009 benefit reductions, comparisons of total benefits were made, excluding legacy pension plans due to lack of data. TVA employees’ total benefits were found to be below those of federal employees covered by FERS, below the median of eleven utility peers studied, and below the median of the entire utility industry.

Given TVA’s plan to contribute $250 million to TVARS in fiscal year 2014, there is no reason to believe TVARS’ funding status will meaningfully improve. TVARS was underfunded by $4.3 billion at the end of fiscal year 2013. TVA’s fiscal year 2013 net periodic benefit cost was $549 million. TVA estimates paying pension benefits of $720 million in fiscal year 2014, including payments under the Supplemental Executive Retirement Plan (SERP) which is not part of TVARS.

Comments

  1. AnonymousFebruary 11, 2014 at 7:17 PM

    Leonard, not only is the system underfunded, I personally have went in the hole on my retirement take home every year since I retied in 2004. I appreciate all the work you do to at least keep our system going.
    Larry peacock

    ReplyDelete
    Replies
    1. Leonard J. Muzyn, Jr., CFAFebruary 11, 2014 at 9:23 PM

      Thanks Larry. I think there is a lot of misinformation out there. I hope this helps clear some of it up.

      Delete
  2. AnonymousFebruary 12, 2014 at 5:52 PM

    Thank you for your unwavering support for retired TVA working folks. You have done this even under TVA management’s unlawful duress. We are grateful for your strength demonstrated when others have caved to TVA management pressure to sell out TVA retirees.

    The data you display below should be seen by the Federal Court considering the suit filed earlier on our behalf, all Tennessee Valley Congress members, and the department of Justice in Washington DC. There is multi-billion dollar wrong doing going on at TVA by the Board and Senior Management. It is not taxpayer money but ratepayer money that should be funding TVA’s pension and the U.S. Justice Department in Washington should pursue the slight-of-hand occurring in TVA to avoid the statuary obligations in the TVA Act regarding pension obligations that taxpayers may someday have to pay instead of ratepayers, as intended.

    Thanks again for your faithful service to TVA retirees,

    ReplyDelete
  3. AnonymousFebruary 12, 2014 at 9:21 PM

    Once again another great report. You are the only board member who understands what the phrase fiduciary duty means.

    ReplyDelete
  4. AnonymousFebruary 13, 2014 at 9:34 AM

    The acceptance of the multimillion bonuses for the highly compensated executives should be likened to criminal activity in the light of the data you give. They are truly "feathering their own nests" at the expense of the employees (now retirees) that built this great organization. Thank you, Leonard, for being such a good representative and advocate for TVA retirees. I encourage all present TVA employees to continue to support you because retirees no longer have ANY input into the process. I think that's very sad, don't you?

    ReplyDelete
  5. AnonymousFebruary 13, 2014 at 9:48 AM

    Thanks for your work and this report. TVA appears to be deliberately underfunding the retirement system of the employees who helped build and maintain the system. I am grateful for the job I had at TVA and the years of service but I can see from their actions of not funding the retirement system and maintaining it that the retirees are not of a concern to them. It appears that they are doing the same thing Congress did to the Social Security system when they got their hands on the actual funds and now its in trouble. Again thanks for your help.

    ReplyDelete

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