Tuesday, August 16, 2016

TVARS Election

Announcement of Candidates

Employees who are TVARS members will elect a director from the two candidates listed below for a three-year term on the TVARS Board. The term will run from November 1, 2016, through October 31, 2019.

James W. Hovious – Systems Engineer, Generators, Power Operations, Chattanooga

Jennifer R. Weber – Senior Program Manager, FERC Compliance & Regulation, Transmission & Power Supply, Chattanooga

Click on the names above to view detailed candidate information.

Everyone Counts, Inc., an independent election firm, will handle the voting process this year.  Election ballots and instructions will be mailed to employees’ home addresses, and employees will also receive voting information at work by e-mail directly from Everyone Counts.

The election will be open from August 29-September 14 (24 hours a day, 7 days a week). The election will close on September 14 at 4:45 EDT. Employees will be able to vote by phone or online. For customer service during the election, including ballot replacement, contact Everyone Counts at 888-492-4763 (Monday-Friday 10:00 a.m.-7:00 p.m. EDT).

Note: It is TVA's policy that candidates and employees are not to use official TVA resources to solicit votes. This includes bulletin boards, electronic mail, interoffice mail, copier equipment, and fax machines.

Monday, August 8, 2016

TVARS Board Approves Pension Funding Unfairly Subsidizing TVA

On August 8, 2016, the TVARS board passed by a 4-3 vote the actual amendments to the rules implementing the changes the board approved by the same 4-3 vote on May 9, 2016.  They will take effect in 30 days if not vetoed by TVA.  I stated the following during the meeting:

  • I will vote against these amendments.  I believe that all TVARS Board members have a duty to place the interests of TVARS, an independent government entity established in 1939 with the full support of previous TVA managements, above those of current TVA management.
  • These amendments will dramatically increase TVARS’ financial risk. TVARS now has just half of the funds it needs to meet its obligations to TVA employees.  These amendments do not provide a commitment from TVA to improve the funded status.  Instead, they reduce the minimum amount TVA is required to fund over the next twenty years to levels well below those required by law of other utilities.  TVARS will be subsidizing TVA, giving it an unfair advantage over competing utilities bound by ERISA pension law.  I can understand why current TVA management may find this desirable.  I do not understand why any TVARS board member finds this desirable.
  • I made a motion to table this vote until TVA employees and retirees are able to review them and provide comments.  Four members of the TVARS board already gave these amendments to TVA, and several of TVA’s comments have already been incorporated.  If the board wanted to do what is in the best interests of the retirement system instead of simply taking directives from current TVA management, I believe the board would have passed my motion to table.  The board did not pass my motion to table.

Click here to see the actual amendments.

Sunday, July 17, 2016

Quick TVA Pension Update

The TVARS Board has yet to meet to discuss and approve the actual rules to implement the pension changes. I suspect TVA is dragging their feet as long as they can because they might want something different if the appeals court rules before the end of August. TVARS must give 30 days’ notice before the new rules take effect October 1, and I do not believe that can be done until the actual rules are finalized. I believe it is likely that Allen Stokes, Suzan Bowman, et al. will go along and rubber stamp any change requests that TVA might make. All COLAs are now in jeopardy. TVA is trying to use the TVARS approved changes as evidence that COLAs are not vested benefits. That is very clear from TVA's last filing with the court.

Friday, June 17, 2016

Court of Appeals Oral Arguments

Revised and updated on June 23, 2016

Please click here to download the appellate courtroom audio of “15-6019 Charles T Evans vs Tennessee Valley Authority Retirement System TVA” from June 14, 2016.  The attorney for the plaintiffs speaks first, followed by the attorney for TVARS, followed by the attorney with TVA’s OGC.  The appellate court judges seemed very interested and asked many questions.  The oral arguments lasted over twice as long as scheduled.  All sides seemed to agree that the district court erred in finding that TVA retirees and employees did not have the right of judicial review. 

I was very impressed with plaintiffs’ attorney Michael Wall who spoke first and made some clarifications at the end.  I believe he did an excellent job answering the judges questions and citing case law to support his arguments.  He also seemed to have a real mastery of the TVARS rules.

TVA’s OGC attorney Edward Meade speaks about the “apparently inconsistent positions of the TVARS board.”  He begins to speak at about 41 minutes.  Click here to see the follow-up letter and attachments that TVA filed with the court on June 17, 2016.  TVA states that the appellate court should not defer to TVARS’ litigation position that COLAs are vested benefits because of the amendments the TVARS board passed on May 9, 2016.  These amendments reduce COLAs in perpetuity in full accord with the 2009 COLA reductions.  This is the vote in which Allen Stokes switched his position on COLAs being vested and voted with Brian Child, Tammy Wilson and John Hoskins.  These are the amendments that Suzan Bowman, TVARA Valleywide President, writes about in the June 2016 TVARA newsletter:  "Overall, the changes are not going to have significant impact on TVA retirees."  Click here to view the newsletter.

I understand that it typically takes 3 to 4 months for an appeals court decision to be reached after oral arguments, but it could come sooner or take years.  The appeals court could rule on various merits of the case, or could send the case back to the district court for judicial review.

On June 22, 2016, plaintiffs' attorney Michael Wall filed a response in opposition to TVA's letter.  Click here to view the response.

Tuesday, June 14, 2016

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.

Sunday, June 5, 2016

Muzyn Comments on TVARA June 2016 Newsletter

Benefits Changes Not Significant for Retirees
By SUZAN BOWMAN, TVARA Valleywide President

[Leonard Muzyn’s comments are in brackets.]

What a wild ride 2016 has been so far!

As I write this, we were just notified that the TVA Retirement System Board voted to accept TVA’s latest proposal on changes in retirement benefits (see article on this page).

The actual wording of the amendments had not been finalized at this time. [Am I the only person concerned that a vote was taken before the actual wording was available?] Overall, the changes are not going to have significant impact on TVA retirees. [An average loss of almost $10,000 per retiree is not significant? Maybe it’s all relative. Some retirees do receive very large pensions and this proposal did hit future retirees, or current employees, harder.]

You should not see any changes in your current check amounts. [A reduction in next year’s increase may feel OK now because it is a year away, but it is still a reduction.] More good news is that the COLA is now vested per TVA, [We have yet to see the wording and TVA can still terminate the system at any time.] and the cap for the COLA rose to 6 percent [I suggested increasing the cap to TVA a few years ago, and I am glad they offered this. I suggested it because I thought TVA would agree to it because, based on current inflation forecasts, it is not expected to increase benefits.] with a minus -.25-percent CPI. [Looks like such a small reduction, but given current inflation forecasts and the compounding effect, this reduction is likely to be significant.] [TVA did NOT take my suggestion to at least leave the COLA untouched on a core dollar amount adjusted per pension type. This would better protect lower income retirees.] Currently, the Rules & Regulations set the COLA cap at 5 percent.

The supplemental benefit did see a reduction in calculation. TVA also increased the amount it will guarantee to contribute to the fund to $300 million per year. [A guaranteed $300 million per year on a fund that is $6 billion underfunded and paying $700 million per year in benefits does not give me much comfort. Enough said. I don’t think anyone needs to be a math major to understand this.] 

These changes take effect on Oct. 1, 2016 (see the chart on page 2 in this newsletter for further explanation of changes).

Many retirees are relieved by this news, and some are still very upset. However, not one person I spoke with over the past six months wanted the system to be terminated. [Not one person I spoke with over the last six years wanted the system to be terminated. They understand that reducing benefits makes it cheaper for TVA to terminate the system. That is why they are upset.]

Even if the lawsuit that was filed in 2010 is decided favorably toward retirees upon appeal, the TVARS Board can make changes to the Rules & Regulations at that time to support the court’s decision. [I may be na├»ve and idealistic, but wouldn’t it be better for the TVARS board to properly do its job to protect benefits it has determined are vested instead of relying on the courts?]

As you recall, after TVA’s proposed changes were announced in December 2015, the TVARA chapter presidents met with TVA President/Chief Executive Officer Bill Johnson and other TVA representatives and TVARS Board members to discuss the proposed changes. I sent a letter (on behalf of the TVARA presidents) to the TVARS Board rejecting the proposed changes. [Thank you Suzan for allowing me to present to the TVARA presidents in Nashville on January 6th.]

When I spoke to the TVA Board in February to encourage its members to reconsider the changes, they said they were committed to find solutions to the underfunding problems. [There are only two ways to solve the underfunding problems. One is to properly fund the pension. The other is to reduce benefits. A $700 million total decrease in benefits coupled with $300 million per year funding does not solve the $6 billion underfunded problem on a pension that pays out $700 million per year in benefits.]

This is the fix we have for now, and this decision will at least allow us to move forward. [This proposal sets us up for more benefit reductions in the future and/or a terminated system. This proposal does not contain a commitment from TVA to keep the system. If avoiding system termination was a major reason for accepting this proposal, shouldn’t the proposal contain a commitment from TVA to keep the system?]