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TVA Recognizes the Challenges Facing TVARS

May 21, 2009

In the past 18 months, during these tough economic times, people with retirement savings or 401(k) accounts have experienced a reduction in their balances. These unprecedented declines in the financial markets are unsettling, and everyone looks forward to better times.

That’s why TVA continues to support the goal of having a sound and stable retirement system. Since its inception in 1939, the TVA Retirement System (TVARS) has been critical to TVA’s success by providing benefits and education to TVA employees, retirees and beneficiaries.

Of course, just like individual savings and 401(k) accounts, the assets of the Retirement System have also been impacted over the past year and a half. The funding status of the System has dramatically decreased from 108 percent at the end of Fiscal Year 2007 to 60 percent as of March 31, 2009.

According to Watson Wyatt, TVA’s actuary, at the end of April 2009, the funded status for a typical corporate plan, managed under a traditional investment approach, experienced similar changes over the same time period. In addition to these depressed markets, the System faces additional unique challenges in having a mature pension plan with annual payments currently exceeding $560 million for more than 22,000 retirees and beneficiaries.

In this economic downturn, pension funding is one of several financial issues that TVA must manage. TVA is experiencing reduced power sales and declining revenues, even as expenses increase, particularly in light of the Kingston recovery effort and mandatory investments in air quality controls. As TVA prepares its FY 2010 operating budget, we must balance controlling expenses and managing debt while keeping rates as low as feasible.

TVA receives an annual recommended contribution request from the TVARS Board of Directors. In some years, the TVARS Board has recommended a lower or even zero contribution to TVA when the System was substantially overfunded. These lower or zero contribution amounts were allowed by the System Rules and Regulations, supported by the System’s actuary, and appropriate at those times.

Since 1939, TVA has partnered with the TVARS Board to provide a competitive pension plan as part of an overall competitive benefit package to recruit, retain and reward employees. TVA values our relationship with the TVA Retirement System Board, and we look forward to continuing to work together on this important issue.

 

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