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Two-Year Anniversary of GAO TVARS Report

Next month marks the two-year anniversary of the March 2017 GAO TVARS Report.  The GAO recommended that TVA "take steps to have its retirement system adopt funding rules designed to ensure the pension plan’s full funding."  The GAO went further and recommended using a "closed amortization period" to ensure that the plan is fully funded at the end of the period.  TVARS uses an "open amortization period."  What is the difference to TVA retirees?  $4,360 million according to the GAO:
Notice that in both cases, TVA begins by owing the pension $6,000 million and paying $452 million in the first year.  So far, so good.  What do we notice about the payments TVA is required to make as the years go by?  Well, using the "closed amortization period," the annual payment remains $452 million.  However, the way TVARS does it, using the "open amortization period," the annual payment is reduced by $3 million to $5 million as each year passes.  So far so good.  TVA can forecast reduced expenses.  But what will this cost TVA retirees?
To answer this question, take a look at the last row in the table.  See the balance remaining at the end of thirty years?  Using the "closed amortization period," the balance is zero and the entire $6,000 million owed to retirees has been paid.  Now look at the balance remaining the way TVARS does it.  At the end of thirty years, TVA still owes retirees $4,360 million!

So, after almost two years have passed since this report was presented to TVA, what has happened?

  • Elected TVARS Board members twice made a motion (see the minutes for the June 2017 and June 2018 TVARS Board meetings) to adopt the GAO recommendation for using closed amortization.  The motion also included the use of a 20-year period in order to meet TVA's stated goal "to eliminate its $6 billion in unfunded pension liabilities within 20 years" and follow the recommendation of the Society of Actuaries included in the GAO report to use "amortization periods of no more than 15 to 20 years."  A 20-year period is still much longer than the 7-year period required by ERISA law to be used by pension plans in the private sector.
  • Appointed TVARS Board members, along with the retiree 7th member, tabled the motion the first time it was made by 4-3 "to allow for further discussion and analysis of the GAO report."  A year later, in June of 2018, they voted it down 4-3 without explanation.
  • Also in the June 2018 meeting, the TVARS Board "noted its previous notational action approving a 1-year renewal of the System’s fiduciary liability insurance policy for the Board and System staff from AIG with $10 million in coverage, subject to a $500,000 deductible."
In summary, four of the seven members of the TVARS Board have successfully blocked TVARS from adopting the GAO recommendations over the last two years while insuring themselves against future claims of breach of fiduciary duty to retirees.  With pension participation declining among active TVA employees, and TVARA leadership ignoring the request of the Elected TVARS Board members to support the GAO recommendations, I worry that this could end very badly for TVA retirees who are depending on their pension.

What do you think?  Please add your comment below.

Comments

  1. Makes me sick. TVA management board members and retiree (who is also TVA contractor - Allen Stokes) continue to disregard TVA pensioners well being. There is no conflict of interest for them because they always "vote" for TVA and against our best interests. There is no transparency or accountability other than to TVA's bottom line, their individual performance pay and separate pension plan for executives.

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