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TVARS Board Holds Quarterly Meeting

TVA Retirement System board of directors held its quarterly meeting September 18, hearing reports from the Investment, Audit and Retirement committees.

Investment Committee

Wilshire Associates, the system’s investment consultant, reviewed investment performance for the period ended June 30, 2015. Performance for the quarter was essentially flat (down -0.1 percent) compared to the system policy benchmark of 0.4 percent. For the 12-month period ended June 30, 2015, the system earned 0.3 percent. 

System assets, fiscal year-to-date, have earned approximately $145 million with benefit payments of approximately $515 million.  The system’s annualized returns over the past three-, five- and 10-year periods have been 9.8 percent, 10.1 percent and 6.0 percent, respectively.

The board reviewed the results of an asset liability study, including assumptions and constraints, with Wilshire Associates and took no action on the current asset allocation policy.

Other topics discussed during the Investment Committee meeting:

  • 401(k) Plan performance review
  • Private market performance review
  • Funded status review
  • Asset transfers
  • Due diligence meetings with current and potential investment managers
  • Investment manager compliance

Audit Committee

The board approved an engagement letter with Crowe Horwath, the system’s external auditor, to provide FY 2015 financial statement audits for the defined benefit plan and the 401(k) Plan. 

Crowe Horwath recently completed a fiscal year 2015 Service Organization Control (SOC 1) review for TVARS.  The review covers the suitability of the design and operating effectiveness of TVARS’ internal controls over areas including retiree payroll, benefit certification, investing, and information technology.   There were no exceptions found in the internal controls review.

Retirement Committee

The board met with their actuary from Mercer to discuss the proposed assumptions for use in preparing the September 30, 2015, annual actuarial valuation. After a review and discussion of the information provided by Mercer, the board approved the following assumptions to be used by Mercer in its actuarial valuation of the System: 7.0% investment rate of return on assets, 2.25% rate of inflation, and a new mortality table with projection scale developed by Mercer based on TVARS actual experience between 2007 and 2014. 

The board also approved an engagement letter with Mercer to provide ongoing actuarial services for FY 2015 as well as an engagement letter with Mercer to perform a long-term forecast study.

Additional details on 401(k) Plan investment menu

The board continued its work with Aon Hewitt Investment Consulting, the 401(k) Plan consultant, on the implementation of a new menu of 401(k) Plan investment options and the negotiation of a new recordkeeping fee structure.  As a part of this work, the board reviewed a proposed implementation and communications timeline and finalized the fund options to be included in the asset classes within a four-tier investment menu structure:

Tier 1 – Target Date Funds

Tier 2 – Passive Funds Class that include: U. S. Bond Index, U. S. Large Cap Index, U. S. Market Extension Index (Small-Mid Cap) and Non-U. S. Equity Index

Tier 3 – Actively Managed Funds that include: Money Market Fund, Stable Value Fund, Core Fixed Income Fund, Inflation Hedging Fund, Large Cap Value Fund, Large Cap Growth Fund, Small-Mid Cap Value Fund, Small-Mid Cap Growth Fund and International Equity Fund

Tier 4 – Brokerage Window

The new 401(k) Plan investment menu is expected to be in place by April, 2016. Participants will receive a letter in December outlining the 401(k) Plan changes followed by an investment decision guide in early January.  Participants will have ample time to review and make any decisions regarding their investments in the 401(k) Plan following the communication of the new menu of fund options.

Questions

Anyone with questions should contact Retirement Management by e-mail at retsvcs@tva.gov or by phone at 865-632-2672, or 800-824-3870 (toll-free).

 

 

 

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