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Report on TVARS Board Quarterly Meeting

The board of directors of the TVA Retirement System (referred to below as either TVARS or System) held its regular quarterly meeting Dec. 2.

Included in this article are summaries of what was discussed and/or voted on during this meeting following reports by the Investment, Audit, Election and Retirement committees of the TVARS board. Unless otherwise noted, all votes were unanimous.

Each TVARS board director serves on one or more of these four committees. Committee appointments are made on an annual basis.

Investment Committee

Wilshire Associates, the System’s investment consultant, discussed the investment performance to date. For fiscal year 2011 (Oct. 1, 2010, through Sept. 30, 2011), the fund earned 1.4 percent or approximately $93 million. The FY 2011 investment performance was significantly affected by the last quarter of the fiscal year, during which investments lost 8.5 percent driven by a number of negative economic developments.

The debt ceiling crisis in the United States led Standard & Poor’s (S&P) to downgrade the U.S. debt rating from AAA to AA+. There was also a debt crisis in Europe as debt costs for Greece and other European countries rose due to concerns over their debt burdens. Plus, economic and employment data in the United States continued to remain negative.

These developments contributed to a sharp decline in equity markets during the quarter. The S&P 500 index fell 14 percent during the quarter. Investment returns have since improved with October being one of the best performing months for the S&P 500 index finishing up 11 percent.

The TVARS board reviewed and approved a new contract, effective Jan. 1, 2012, with Wilshire Associates. This contract is for one year with the option to renew for two additional one-year periods.

As a part of its administration of the 401(k) plan, in accordance with the 401(k) Investment Policy Statement, the TVARS board reviewed performance of the plan’s investment options, with specific focus on the Fidelity Magellan fund and the Fidelity International Real Estate Fund.

The TVARS board also approved the addition of two low-cost international equity index funds to the plan options, the Fidelity Spartan Global ex U.S. Index Fund and the Fidelity Spartan Emerging Markets Index fund. 

Other topics discussed during the Investment Committee meeting included the following:

  • Funded status volatility and risk management
  • Investment managers’ compliance with their guidelines
  • Due-diligence meetings with current and potential investment managers
  • Asset transfers during the quarter
  • Asset allocation policy implementation update
  • Investment manager fees

Audit Committee

The TVARS board reviewed and approved a new contract, effective Sept. 1, 2011, with E. H. Johnson & Co. P.C., the System’s internal auditor. This contract is for one year with the option to renew for two additional one-year periods.

The annual audit to assess controls related to System operations for the period from Aug. 1, 2010, to July 31, 2011 (SSAE 16 audit report), performed by E.H. Johnson & Co., was provided to the TVARS board. The report resulted in no significant findings and was accepted by the board.

The board also received an update from Crowe Horwath LLP, the external auditor for TVARS, regarding the current audit of financial statements for FY 2011.

The TVARS board approved the following policies as part of its overall governance:

  • Board Education Policy
  • Executive Secretary Evaluation Policy
  • Director Election/Selection Policy (by a 6 to 1 vote)
  • Overall Governance Policy

These policies will be available on the TVARS website at www.tvars.com and will be in addition to previously approved policies already posted.

Upon the recommendation of Bradley Arant Boult Cummings, outside counsel for TVARS, the board approved amendments to the TVARS Rules and Regulations and 401(k) plan Provisions, adding Administrative Claims and Appeal Procedures. These plan amendments will provide specific procedures for how members, retirees or beneficiaries file a claim or appeal with TVARS and how such claim or appeal will be reviewed.

Election Committee

As communicated in the Oct. 7 TVA Today, Tony Troyani won the runoff election for the director vacancy. The results of the runoff election were accepted by the TVARS board.

Retirement Committee

The TVARS board accepted the March 31, 2011, Actuarial Valuation of the Variable Annuity Plan performed by Mercer Human Resource Consulting, the System’s actuary. This valuation is performed annually to review plan experience and recommend any necessary adjustments to the outstanding units in the Variable Annuity Plan.

The TVARS board also approved a contract with Mercer Human Resource Consulting to perform a long-term funding policy study for the System. Studies such as this have been performed every three to five years. The last study was done in 2007.

The TVARS board approved a 6 percent interest crediting rate for the Cash Balance Benefit Structure for 2012 as calculated according to the Rules and Regulations.

The TVARS board elected Les Bays as chair and Allen Stokes as vice-chair to serve three year terms, ending Oct. 31, 2014. New committee appointments were also made and will be available on the TVARS website at www.tvars.com.

For planning purposes for FY 2012, and as a basis to evaluate performance of the TVARS board and staff, the staff provided a listing of objectives for FY 2012 for discussion.

Questions?

The TVARS board is committed to providing accurate and timely information to employees and retirees and hopes this information is of value to them.

Anyone with questions can contact Retirement Management by email at retsvcs@tva.gov or by phone at 865-632-2672, 800-824-3870 (toll-free) or 865-632-7576 (for the hearing-impaired).

 

 

 

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