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...