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TVA Pension Plans - Financial Update

  • 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 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)

Regulatory Accounting. TVA has classified all amounts related to unrecognized prior service costs, net actuarial gains or losses, and the funded status as regulatory assets as such amounts are probable of collection in future rates. In 2015, TVA began including its cash contributions to the pension plan in the rate-making formula; accordingly, on October 1, 2014, TVA began recognizing pension costs as regulatory assets to the extent that the amount calculated under GAAP as pension expense differs from the amount TVA contributes to the pension plan. (p. 125)

Comments

  1. AnonymousDecember 7, 2014 at 7:28 PM

    Does this mean that TVA has been caught with their hand in the cookie jar?

    ReplyDelete
    Replies
    1. Leonard J. Muzyn, Jr., CFADecember 8, 2014 at 6:37 PM

      Good question. Something motivated TVA to change its rate-making methodology.

      Delete
  2. AnonymousDecember 8, 2014 at 4:22 PM

    How much money has TVA set aside to fund upper management deferred retirement?

    ReplyDelete
    Replies
    1. Leonard J. Muzyn, Jr., CFADecember 8, 2014 at 6:42 PM

      Looks like $6 million was contributed to it in 2014. I know $250 million went to TVARS and $256 million was the total amount TVA contributed to its pensions. Don't know how much in total over the years since it began.

      Delete

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