Saturday, March 18, 2017

TVA's 2016 Pension Funded Status


Per TVA's 2016 10-K financial statement, the pension funded ratio stayed relatively flat in 2016 primarily due to these three major components:

  • gain of $960 million due to pension benefit reductions
  • gain of $733 million due to investment returns
  • loss of $1.2 billion due primarily to the reduction in the discount rate to 3.65% from 4.50%

Per TVA's sensitivity analysis, a quarter point change in the discount rate can be expected to change the liability by $388 million. While decreasing interest rates worsen the pension funded ratio, increasing interest rates improve it.

Saturday, March 4, 2017

TVA Pension Lawsuit Dismissed

Judge Trauger has ruled for TVA in the pension lawsuit.  The Order can be read here. The Court’s Memorandum Opinion can be read here. The Entry of Judgment can be read here.

Tuesday, January 3, 2017

Eight-Year Funding Plan a Disaster; Twenty-Year Plan Will Fix It?


In eight years, with a 4-3 majority of the TVARS Board voting to reduce benefits in 2009 and again in 2016, TVA's pension funded ratio declined from 77% to 55%. TVA has now embarked upon a twenty-year funding plan which was approved by a 4-3 majority of the TVARS Board in 2016 along with the most recent benefit reductions.

Loyalton, CA reduced their retirees' pensions by 60%. They are 40% funded. See the Fox Business video here. Note that Loyalton pulled out of CalPERS and has quit meeting its funding obligations to CalPERS. That is what led to the cuts.

Sunday, December 11, 2016

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.


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.

Wednesday, December 7, 2016

More Filings in Support of Employees and Retirees in TVARS Court Case


 INTRODUCTION

In the words of the Sixth Circuit, “TVARS has an obligation to look out for the interests of plan participants . . . .” At a minimum, TVARS must follow its own Rules. That did not happen between 2009 and 2013. The TVARS Board passed amendments that slashed hundreds of millions of dollars of COLA and interest benefits. The Board failed to give proper notice of the amendments and disobeyed the Rules that protected such benefits. The Board then took hundreds of millions of dollars out of the Excess COLA Account, a fund set aside to pay for COLAs in the future. The amounts taken far exceeded the limits in the Rules.

The Court should grant summary judgment to Plaintiffs and enforce the Rules. It makes a difference to tens of thousands of employees and retirees. Not even federal agencies can ignore the law for cost savings or expediency.


Wednesday, November 2, 2016

New Filings in Support of Employees and Retirees in TVARS Court Case

Both the 2009 Amendments and the debits to the Excess COLA Account violated the Rules. TVA’s arguments ignore critical language in the Rules and persuasive authority from the Sixth Circuit. The material facts are undisputed, and Plaintiffs are entitled to judgment as a matter of law.

First, the TVARS Board violated Rules § 13 by not giving “at least 30 days’ notice of the proposed amendment” to plan participants. TVARS waited to give notice until after it took the final vote. At that point, the 2009 Amendments were no longer merely “proposed,” and plan participants did not have a chance to petition the Board.

Second, the 2009 Amendments reduced benefits in violation of Rules § 13 in two separate ways. The COLAs at issue were already “covered by accumulated reserves held therefor,” the Excess COLA Account. The interest rate credited to existing balances in the Annuity Savings Account was a “nonforfeitable” or vested benefit.

Third, the TVARS Board violated Rules §§ 9.B.6 and 10.D.2 by debiting all of the COLA costs for 2009-2013 from the Excess COLA Account. Defendants have not even tried to justify this under the Rules. The Court should declare the debits unlawful, regardless of how it rules on the 2009 Amendments.

Monday, September 19, 2016

Hovious Wins TVARS Board Election

In the recent election for a director vacancy on the TVA Retirement System Board, employees voted to re-elect James W. Hovious.  His new three-year term will run from Nov. 1, 2016, to Oct. 31, 2019.
 
Of the 2,975 votes cast, Hovious received 2,197 (73.85 percent). Jennifer Weber received 778 votes (26.15 percent).


Click here to see Jim Hovious’ candidate information.