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Life Expectancy Changes Lead to Modification of Some TVARS Benefit Calculations

Only Minor Changes Expected

The Tennessee Valley Authority Retirement System board of directors recently adopted new actuarial assumptions that will modify some benefit calculations for retirements that become effective on or after Feb. 1, 2014.

The assumptions, which the board is required to periodically review, are based on the most recent study by the TVARS actuary, Mercer Human Resource Consulting.

The new assumptions take into account changing life expectancies of employees and retirees, and will implement mortality factor tables that more accurately reflect the demographics of TVA’s workforce.

The new tables and assumptions will be used to determine 1) maximum annuity payments, 2) annuity payments where optional survivor benefits are elected, and 3) pension payments where optional survivor benefits are elected.

In most cases, effects on benefits are expected to be minimal, but will vary depending on the elections made at retirement.

Here are some examples of how the changes will affect future retirees:

A 55-year-old with a $100,000 Fixed Fund balance could expect his or her maximum annuity to decrease by no more than $26 per month. If this same person elects a 100 percent continuing survivor benefit to a beneficiary who is also 55 years old, then the overall effect in their monthly, fixed-benefit would be a decrease of $11 per month for each $100,000.

A 55-year-old with a $1,000-per-month maximum pension would see no change in his or her maximum pension calculation. If this same person elects a 100 percent continuing survivor benefit to a beneficiary who is also 55 years old, then their monthly pension benefit would increase by $18 per month per $1,000 maximum pension benefit.

While monthly maximum benefits from the Fixed/Variable Fund(s) will decrease, the assumptions used to determine survivor benefits will generally increase the monthly pension amounts of those who choose a survivor option. In some cases, electing a survivor option on the annuity may result in an overall increase for that benefit as well. This is because the actuarial reductions in annuities and pensions used to fund survivor benefits are, in effect, payments for life insurance − and the cost of this life insurance will decrease to some extent.

See more examples.

Things that won't change

The changes will not affect the pension factors for Original Benefit Structure participants (for example, the 1.3 percent figure for those who have attained the highest factor) or the conversion factors for Cash Balance Benefit Structure participants.

As before, employees eligible to elect a monthly benefit from the Fixed/Variable Fund can choose to withdraw or roll over their Fixed/Variable Fund balances instead of electing a monthly benefit from the system. The new assumptions and tables will have no impact on the amount of their Fixed/Variable Fund balances that they choose to withdraw or roll over.

Employees who first became a TVARS member on or after Jan. 1, 1996, are only eligible to withdraw or roll over their balances at termination. Because they do not have the option of electing a monthly benefit, the new assumptions and tables will have no impact on their Fixed/Variable Fund balances.

Implementation of these changes

TVARS anticipates being able to provide estimates reflecting the new factors by mid December.

Employees who have general questions about this change can call or e-mail the TVA Retirement System (e-mail: retsvcs@tva.gov; phone: 632-2672, 1-800-824-3870).

 

 

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