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Report on TVARS Board Quarterly Meeting

The TVA Retirement System (referred to below as either TVARS or System) board of directors held its regular quarterly meeting Sept. 15.

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.

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 through June 30, the fund earned 11.1 percent vs. the policy benchmark of 10.9 percent. Over the past 12 months through June, assets have earned 20.4 percent.

In dollar terms for FY 2011 through June, assets have earned about $741 million, of which $458 million has been used for benefit payments to retirees and beneficiaries.

The TVARS board reviewed and approved a new long-term asset-allocation policy and investment strategy for fund assets. In reaching this decision, the board analyzed various asset-allocation and investment strategies over a six-month period with the assistance of System staff; Wilshire Associates; Michael Brakebill, a non-voting member and advisor to the Investment Committee; and other experts.

The asset-allocation process involves the review of long-term expected returns, risks and correlations of various asset classes. As a part of this new asset-allocation policy and investment strategy, the TVARS board has adopted a “de-risking” strategy focused on the volatility of the System’s funded status. The objective of the de-risking strategy is to reduce the volatility of the funded status of the System over time.

The implementation of this new policy will occur over a 12- to 18-month period. Additional information regarding the de-risking strategy will be available in the revised Statement of Investment Policy that was also approved by the TVARS board. That policy will be updated on the this website.

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

  • Funded status
  • Investment managers’ compliance with their guidelines
  • Due-diligence meetings
  • Report on rebalancing of System assets
  • Review of 401(k) Plan investment options
  • Domestic equity allocations between large cap and small cap
  • Investment manager updates

Audit Committee

The TVARS board continued discussion of the following policies as part of its overall governance of the System:

  • Confidentiality Policy
  • Board Education Policy
  • Executive Secretary Evaluation Policy
  • Communication Policy
  • Election Policy
  • Overall Governance Policy
  • Investment Policy Statement (revised)

Once approved, these policies will be available on the website. The following previously approved policies are already posted on the site: the 401(k) Investment Policy Statement, the Service Provider Evaluation & Interaction Policy, the Ethics & Code of Conduct Policy, and the Board Self-Evaluation Policy.

The TVARS board approved an engagement letter with the law firm of Bradley Arant Boult Cummings to serve TVARS as outside legal counsel regarding administration, operation and maintenance of the System. As previously communicated, the TVARS board hired Bradley Arant Boult Cummings earlier to represent the System in the lawsuit related to the August 2009 amendments to the TVARS rules and regulations. 

Election Committee

As communicated in the Sept. 22 TVA Today, the System is holding a runoff employee election for a director position. The runoff election between Mike Blair and Tony Troyani is being conducted from Sept. 19 through Oct. 5.

The results of the initial election that led to this runoff were accepted by the TVARS board.

Retirement Committee

In the previous TVARS board quarterly meeting, System staff members recommended a default benefit election for vested terminated employees who fail to apply for benefits within the 60-day timeframe provided for in the TVARS rules.

The TVARS board approved changes to the TVARS rules and regulations establishing default elections for such individuals. The System’s staff will notify former members of this change, as well as communicate this change to current employees as they terminate employment with TVA.

The TVARS board also approved an engagement letter with Mercer Human Resource Consulting, the System’s current actuary, to provide ongoing actuarial services for FY 2012.

As part of TVA’s budget approvals for FY 2011 and FY 2012, the TVA board of directors has approved delegations of authority to TVA’s Chief Executive Officer that allow the CEO to approve discretionary contributions by TVA to the System for FY 2011 up to $270 million and for FY 2012 up to $300 million.

In order to satisfy a condition set forth in these TVA board-approved resolutions with respect to the crediting of any such discretionary contributions, the TVARS board approved an amendment to the TVARS rules.

The amendment states that any discretionary contributions that TVA makes to the System for FY 2011 and FY 2012 will be credited to the System’s Accumulation Account, instead of to the Excess COLA Account, which would have been the case before the amendment. (COLA stands for “cost of living adjustment.”)

In addition, the TVARS board approved changes to the TVARS rules and 401(k) Plan to allow credit for certain TVA lump-sum payments made to employees in lieu of base-wage or salary increases for FY 2012 for the purposes of calculating pension benefits under the rules and TVA matching contributions under the 401(k) Plan.

The TVARS board also held a planning discussion with Fidelity Investments regarding individual 401(k) Plan education meetings to be held at various work locations starting as early as this fall.

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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