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

2017 TVARS Benefit Reductions

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.

  • 1.24% pension COLA reduced to 0.99% for retirees
  • 1.24% supplemental benefit COLA reduced to 0.00% for most retirees who are currently receiving their now frozen maximum supplemental benefit
  • 6.00% fixed fund interest rate during employment reduced to 5.00% for employees who have balances based on their own contributions in the fixed fund
  • 6.00% cash balance interest credit reduced to 5.00% for employees first hired on or after 1/1/96 who have a cash balance pension account

Sunday December 18, 2016 Update:

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.

Sunday, September 11, 2016

Amendments Effective October 1, 2016

As indicated in TVA's presentation at the August 25, 2016 TVA Board meeting, TVA did not veto the amendments approved by the TVARS Board on August 8, 2016.  The 30-day period in which TVA could have vetoed them has now passed.

Links to Summary Tables of Benefit Changes

Changes for employees who first became TVARS members on or after 01/01/1996 and have less than 10 years of TVARS service as of 10/01/2016

Changes for employees who first became TVARS members on or after 01/01/1996 and have 10 or more years of TVARS service as of 10/01/2016

Changes for employees who first became TVARS members before 01/01/1996 and elected to be in the Cash Balance Benefit Structure

Changes for employees in the Original Benefit Structure

Changes for Retirees

Twenty-Year Limit on TVA's Funding Obligations

For the next twenty years, TVA's annual funding obligation is limited to the larger of $300 million or the normal cost (1) plus an amount that, if paid 30 years in a row, would eliminate the accumulated funding shortfall.  I understand that it is now virtually unheard of for any plan to use a period longer than 20 years.  Corporate utility plans, TVA's competitors, must use a period of 7 years.  The shorter the period, the greater the required contribution.  The accumulated funding shortfall was $5.4 billion at the end of the last fiscal year.  

Increased TVA Control of TVARS Board

Beginning October 1, 2016, five of the seven TVARS board members will be able to remove one of its members.  Given that TVA can remove any of the three TVARS board members it appoints at will, it is highly unlikely that any of these three will vote to remove a member unless TVA desires them to do so.  Even if the other four members (three elected and one retiree) unanimously agree, they will fall short of the needed five votes.  Thus, in effect, TVA's consent will be required for the board to remove one of its members.  In effect, TVA's consent along with the consent of just two of the four non-TVA appointed board members will be sufficient to remove a non-TVA appointed board member.

(1) The normal cost is the annual cost of providing pension benefits for services performed by today's members. 

Saturday, August 27, 2016

50/50 in 20

From Thursday's TVA Board meeting: A 50/50 chance TVA pension is properly funded in 20 years.

Click here to see all the slides concerning TVARS presented at the Thursday August 25, 2016 TVA Board meeting.