TVA Workforce Pension Benefit Reductions / Golden Parachute for TVA's CEO

The TVARS Board approved the following 2017 benefit reductions on December 8, 2016 in order to comply with the rule amendments passed 4-3 by the TVARS Board in a special-called meeting on August 8, 2016.  See the transcript of the special-called meeting here.

• 17% reduction of the annual compounding rate in the cash balance pension formula (6% reduced to 5% for employees first hired on or after 1/1/96)

• 1.24% supplemental benefit 2017 COLA, as well as all future supplemental benefit COLAs, eliminated for most retirees

• Reduced maximum supplemental benefit to apply to all current and future retirees

• 1.24% pension COLA reduced to 0.99% for retirees

• 6% fixed fund interest rate during employment reduced to 5% for employees who have balances based on their own contributions in the fixed fund

In contrast to reduced retirement benefits for TVA employees and retirees, on December 12, 2016 the TVA Board gave TVA's CEO a golden parachute.  If President-Elect Trump appoints TVA Board members who decide they want someone else as CEO, Mr. Johnson will have the vesting period waived on his executive retirement and be credited with an additional 5 years of service.

The TVA Board also increased Mr. Johnson's eligible annual cash award by $200,000.

From the Tennessee Valley Authority 8-K:

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On December 12, 2016, the TVA Board of Directors (“Board”) approved the following changes to the compensation of TVA’s President and Chief Executive Officer William D. Johnson:

• In the event of involuntary termination except for cause (as described in the Offer Letter to William D. Johnson Approved as of November 1, 2012, included as Exhibit 99.1 to TVA’s Current Report on Form 8-K filed on November 7, 2012) prior to five years of actual service, the vesting requirement under TVA’s Supplemental Executive Retirement Plan (“SERP”) will be waived and Mr. Johnson’s SERP benefit will be calculated based on ten years of credited service.

• In the event of termination for cause or voluntary termination for any reason prior to five years of actual service, the vesting requirement will be waived and Mr. Johnson’s SERP benefit will be calculated based on five years of credited service.

• If Mr. Johnson remains with TVA through calendar year 2018, his SERP benefit will be calculated based on 12 years of credited service (six credited years and six actual years).

• In the event of involuntary termination except for cause after five years of actual service but prior to six years of actual service, Mr. Johnson’s SERP benefit will be calculated based on the number of actual years of service plus six credited years.

• In the event of termination for cause or voluntary termination for any reason after five years of actual service but prior to six years of actual service, Mr. Johnson’s SERP benefit will be calculated based on his actual years of service plus five credited years.

• Mr. Johnson will be eligible to receive a cash award of up to $200,000 per year based on the evaluation of his performance commencing in fiscal year 2017. The Chair of the Board has been delegated authority to grant this award based on the Chair’s evaluation of Mr. Johnson’s performance and consultation with the appropriate Board committee and individual Board members.

Except as set forth above, there were no other changes to Mr. Johnson’s compensation as described in TVA’s Annual Report on Form 10-K for the year ended September 30, 2016.