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Comments on TVARS Amendments

I voted against the amendments scheduled to take effect on October 1, 2016 because they reduce earned benefits the board has determined are vested.  They also authorize TVA to inadequately fund the remaining benefits for the next 20 years.  They reduce benefits by about $700 million.  Even after this reduction, actuarial projections indicate that the 20-year funding requirements will not be enough to fully pay the remaining benefits.  In addition, these amendments transfer significant stock market risk to the plan’s beneficiaries while giving the board the authority to suspend TVA’s contributions to the plan for any reason. TVA will still be able to terminate the plan at any time.

TVA’s agreeing that the remaining COLAs are vested gives the beneficiaries nothing because the rules clearly state that the retirement board determines what benefits are to be paid.  The board has already determined and informed the court hearing the pending lawsuit that COLAs are vested benefits.  Passage of these amendments could benefit TVA in defending against the lawsuit because it makes the board appear weak and inconsistent.
  
Without these amendments, a funding requirement averaging $353 million over twenty years would be required per our actuary.  I do not believe this level of funding would be onerous to TVA and its rate payers.  That averages $53 million dollars more a year than is contained in this proposal, and I was more than willing to negotiate the timing of these payments from TVA.  Unfortunately, this process was about meeting TVA’s demands and not about negotiation and compromise.  

I made several suggestions a few years ago to better protect lower income beneficiaries if a majority of the board insisted on reducing vested benefits over my objections.  These included reducing COLAs only on pension payments above adjusted core amounts, eliminating COLAs completely for those receiving the separate executive pension, and suspending COLAs for retirees while they are receiving payments from TVA for contract work.  Unfortunately, these suggestions were dismissed by a majority of the board and were not incorporated in these amendments.  I am pleased that a suggestion I made a few years ago to increase the maximum COLA was incorporated in these amendments.

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