Skip to main content

Update on Implementation of Hovious/Muzyn TVARS Proposal

Jim Hovious and I outlined a TVARS proposal in a letter to TVA’s Trades and Labor Council on February 1, 2016.  Please see letter here.  A key element of our proposal, a suggested revision of the minimum contribution formula, appears to be falling into place.  A compromise minimum contribution formula has been found which produces an average 20-year minimum required annual contribution of about $350 million.  The compromise formula produces a contribution somewhat lower than would be required under ERISA, yet somewhat higher than would be required under government pension rules.  The formula provides funding for all current benefits without the need for any benefit reductions. (Note 1)

Our proposal seeks no reductions in vested benefits, so its implementation would be unlikely to jeopardize member interests in the current lawsuit. (Note 2)  It does not include governance changes which would diminish TVARS’ independence and member influence, such as TVA control of TVARS’ asset allocation and term limits on TVARS directors.  It only includes governance changes which would enhance TVARS independence and protect or increase member influence.  These include direct retiree election of two TVARS board directors, a recall election process, and guidelines to reduce seventh director conflicts of interest.
     
The other five directors of the TVARS Board have yet to fully express their support for our proposal.  Please continue expressing your support for our proposal so that the TVARS board will approve it and put an end to the uncertainty currently surrounding our pension benefits.

Leonard Muzyn


Note 1:  The major difference between ERISA and government pension funding requirements is the time allowed to achieve fully funded status.  ERISA pensions generally must fund significant deficits within 7 years, while government pensions generally must fund them within 20 years.  This compromise formula utilizes 7 years for parts of the deficit, and 20 years for other parts. The current formula specified in the TVARS’ rules assumes 30 years for the entire deficit.  It appears that the compromise formula would produce a little higher contribution in the early years, and a little lower contribution in the later years, but it averages to about $350 million and assumes no benefit reductions.
Note 2:  Our original proposal included only one benefit reduction.  That was the elimination of TVARS benefits based on pay in excess of executive level federal pay caps.  It appears that these may be considered vested benefits according to TVARS’ rules.  If this holds, I could no longer support their elimination.   However, I would then be very supportive of amending the rules to require TVA to provide separate funding for these past and future benefits.

Comments

Post a Comment

Popular posts from this blog

Why do TVARS board meetings remain closed?

Within the next couple of months, the TVARS board must vote on a contribution amount to recommend that TVA make in fiscal year 2014. In conjunction with the contribution amount, it is possible the vote will include amendments to the rules. In conjunction with the contribution amount in 2009, the rules were amended to: suspend contribution requirements and related actuarial valuations for four years (Section 9B9); suspend the requirement that part of the contribution go to the “excess COLA account,” which was designed to accumulate and grow funds to be used for payment of future COLAs (Sections 9B9, 10D1 and 10D2); and reduce legitimate accrued pension benefits (Sections 6I, 7L and 18C3). The vote in 2009 was not open to observation, and unless the TVARS board takes action, neither will the vote this year. Not one of the six other TVARS board members would second the motion I made in December to open TVARS meetings to observation. All that is required to open future boa...
18 comments
Read more

Introduction

This is my personal blog to facilitate communication among TVA employees, retirees and beneficiaries who are members of TVARS and who wish to preserve their retirement benefits. Please join my site and post your comments.  I have been an elected member of the TVA Retirement System (TVARS, or the system) board of directors since 2003. I am not speaking officially for the TVARS board of directors or TVA management. TVARS is an entity legally independent of TVA. Three of the board members are TVA employees (including myself), three are appointed by TVA management (currently all TVA executive managers), and the seventh is generally a retired TVA employee (appointed by the other six). As TVA employees, we all have a duty of loyalty to carry out directives issued by TVA management in our regular TVA jobs. However, each board member has a fiduciary duty to all the members of the system when performing TVARS duties. This fiduciary duty legally supercedes our duty of loyalty to carry out di...
21 comments
Read more

Why isn't the TVARS board protecting TVARS members?

In order to protect TVARS members in the event the federal government divests TVA, the TVARS board can clarify in the TVARS rules that COLAs are vested benefits . (See support from Dennis To here .) Time is very critical now that TVA is working with President Obama’s administration on a financial review of TVA which includes the option of TVA being divested from the federal government. (See here .) TVARS could be terminated upon divestiture. It is very important that the TVARS board take steps to safe-guard benefits before this occurs. If system termination occurs while TVARS remains significantly underfunded, TVARS may never be able to achieve fully funded status. Not one of the six other TVARS board members would second the motion I made in June 2012 to clarify that COLAs are vested benefits. Once again, I would be glad to forward any e-mails from you to the entire TVARS board. Please e-mail them to me at ljmuzyn@tva.gov .
20 comments
Read more