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TVARS News

Below is information of interest for employees and retirees from the latest TVARS board meeting held December 3, 2018, in Chattanooga.

Cost-of-living adjustment (COLA) for 2019

For 2019, the COLA for eligible retirees and beneficiaries will be 2.21%.

The TVARS Rules and Regulations provide that eligible retirement benefits (pension and supplemental benefits) will receive a COLA based on an inflation measure, which is the Consumer Price Index - All Urban Consumers (CPI-U) - an index maintained by the U.S. Labor Department that measures the price changes in a broad group of various goods and services purchased by consumers. Under the TVARS Rules, the COLA is calculated as the percentage change in the average CPI-U for the period of November 2016 - October 2017 to the period November 2017 - October 2018 (2.46%) minus 0.25%. Eligible retirees and beneficiaries will see the increase in checks beginning January 31, 2019.

Interest Crediting Rates for 2019

Cash balance (pension) accounts receive interest credits on a monthly basis and Fixed Fund (annuity) accounts receive interest credits on a daily basis and these interest crediting rates are set for each calendar year according to the TVARS Rules.

For employees with cash balance accounts who were hired prior to January 1, 1996, the interest rate for 2019 will be 6% - the calculation is equal to the change in the CPI-U (2.46%) plus 3% but not less than 6%.

For employees with cash balance accounts who were hired on or after January 1, 1996, the interest rate for 2019 will be 4.75% - the calculation is equal to the change in the CPI-U (2.46%) plus 2% but not less than the TVARS assumed rate of investment return (6.75%) minus 2%.

For Fixed Fund accounts, the interest rate for 2019 will be 4.75% - the calculation is equal to the change in the CPI-U (2.46%) plus 2% but not less than the TVARS assumed rate of investment return (6.75%) minus 2%.

Financial Report

TVARS ended fiscal year 2018 with positive investment returns and continuing contributions from TVA, which resulted in assets of $8 billion-maintaining the funded status from the previous fiscal year.

For the fiscal year, TVARS earned 5.5% on its investments (or approximately $425 million) while maintaining a well-diversified and risk-focused portfolio. Longer term, TVARS has earned an annualized 7.4% on its investments over the last ten years and outperformed its policy benchmark by 0.8% over the time period.

In addition to the investment performance, contributions from TVA helped to maintain the System's funded status even as TVARS made retirement benefit payments to retirees and beneficiaries during the fiscal year of over $700 million. During fiscal year 2018, TVA contributed $300 million to TVARS, and the TVA board has also approved a $300 million contribution to TVARS for fiscal year 2019.

401(k) In-Plan Roth Rollovers

In addition to making pre-tax and after-tax contributions to the 401(k) plan, employees can make Roth contributions to the plan. Roth 401(k) accounts are funded with employee after-tax dollars; however, these accounts are unique, because Roth contributions, as well as the investment earnings on those amounts, will never be subject to taxation again.

The TVARS board approved an amendment to the 401(k) plan provisions that will expand the features around these accounts and allow participants to voluntarily elect to convert or "rollover" money from their pre-tax and after-tax accounts to a Roth account within the 401(k) plan. It's a great feature that will allow some participants who want to exercise this option to diversify the types of taxable accounts with their retirement benefits without having to take or roll their money out of the 401(k) plan.

This in-plan Roth rollover feature will be available in the 401(k) plan beginning April 1, 2019. In the spring, TVARS will provide information to all participants on this new feature along with education on Roth 401(k) accounts in general - how they work, and who might want to consider using them.

7th Director Retiree Selection Update

After receiving applications from 36 retirees who were interested in being considered for the 7th director position, the TVARS board agreed on a process for reviewing the candidates and selecting a number for further consideration. Following this process, the TVARS board has identified an initial list of five retirees with whom they would like to interview. The TVARS Executive Secretary has contacted these five retiree candidates and is currently working with the TVARS board members to identify a date in January 2019 for in-person interviews with these candidates.

IRS contribution limits for 2019

During 2019, employees will be able to contribute up to $19,000 to the 401(k) plan on a pre-tax or Roth basis, which is a $500 increase from 2018. Employees who are age 50 or older at any time during 2019 may make additional "catch-up" contributions to the 401(k) plan of up to $6,000 over the $19,000 limit on a pre-tax or Roth basis, which is the same amount as 2018.

The overall contribution limit to the 401(k) plan and the TVARS fixed and variable (annuity) funds for 2019 will be $56,000, which is a $1,000 increase from 2018. This overall limit includes the following contributions: (i) employee pre-tax, Roth, and after-tax contributions to the 401(k) plan; (ii) TVA's matching and non-elective (automatic) contributions to the 401(k) plan; and (iii) employee after-tax contributions to the TVARS fixed and variable (annuity) funds (subject to a separate $10,000 limit) for employees hired before January 1, 1996, who are eligible to contribute to those funds. Any "catch-up" contributions made by employees age 50 or older to the 401(k) plan do not count toward the overall contribution limit of $56,000.

 

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