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TVARS Approves 2018 COLAs and Interest Rates

Retiree COLAs: 1.84% for original, cash balance, and supplemental pension benefits based on 2.09% CPI increase less 0.25%.

Current Employee Interest Rates:

  • 6.0% on Cash Balance accounts for those hired before January 1, 1996 based on 6.0% minimum.
  • 4.75% on Cash Balance accounts for those hired on or after January 1, 1996 based on minimum of assumed investment return of 6.75% less 2.0%.
  • 4.75% on fixed annuity accounts based on minimum of assumed investment return of 6.75% less 2.0%.

These were approved this afternoon at the December 4, 2017 quarterly TVARS Board Meeting.

Comments

  1. Thanks Leonard. If this has been communicated by TVA to its employees, I must have missed it.

    ReplyDelete
    Replies
    1. These were formally approved at the December 4, 2017 TVARS Board Meeting. A 1.25% reduction for employees hired 1996 or later on their cash balance pension, and a 1.25% reduction for all employees on their fixed annuity accounts. These reductions are due to the TVARS rule amendments approved last year.

      In regards to the COLA, the minutes of the November 2, 2017 TVARA Board Meeting stated "The 2018 COLA for the pension will be addressed at the TVARS December board meeting. The calculations currently indicate the COLA may be just over 2%." Not quite right. They forgot about the reduction due to the rule amendments approved last year. A quarter of a percent reduction does not sound like much, but it will be felt by retirees every year moving forward.

      The effect of these 2018 reductions will actually grow every year due to missed future compounding. Oh, the power of compound interest and its ability to make a large reduction look relatively small!

      Delete
    2. 2.09%- 0.25% = 1.84%
      The COLA should have been 2.09%, but is instead 1.84%.
      1.84/2.09 = 88.038%
      100%-88.038% = 11.9617%
      The COLA paid is thus 11.9617% less than the COLA that should have been paid. Don't let the 0.25% figure TVA puts out fool you.
      Further, the 11. 9617% reduction incurred this year is gone forever, along with any compounding it would have accrued in future years.
      The TVARS 7th retiree director, who in 2016 incidentally held a TVA contracting job at the time the COLA reduction was voted in by a 4-3 margin, cast the swing vote to enable this COLA reduction. A retiree 7th director placed on the TVARS Board in an election in which all retirees were eligible to vote might be more accountable to retirees.

      Delete

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