The TVA Retirement System Board of Directors (Board) held its quarterly meeting March 6, 2020 in Chattanooga, with business conducted through the Board’s Investment, Audit, Retirement and Election committees.
Investment Committee Highlights
TVARS staff reviewed recent financial market volatility. TVARS is actively monitoring the financial markets, and is in ongoing discussions with our investment consultants and fund managers. TVARS has constructed a diverse portfolio that is designed to manage through these volatile times. Liquid assets are maintained to ensure benefit payments will be made today and in the future. The portfolio is managed for the long term to keep the Retirement System sound. TVARS encourages employees to use the same principles in their 401(k) as used in the pension funds, which include holding a diversified portfolio of assets, remaining disciplined by avoiding impulsive decisions based on fear and uncertainty, and staying focused on their long term goals and plans for achieving them.
Aon, the System’s 401(k) Plan consultant, reviewed the 401(k) Plan, including the performance, fees and dollars invested within each fund as of December 31, 2019. 401(k) Plan assets were approximately $2.9 billion, and most managers outperformed their respective benchmark index and median peer group over the previous three-and five-year periods. Aon addressed the recent market volatility and stressed the importance of diversification and a long-term perspective for Plan participants. Aon specifically discussed with the Board with the 401(k) Plan’s Target Retirement Portfolios, in which almost half of Plan participants’ assets are invested. The Target Retirement Portfolios are designed to provide growth in the early years while limiting downside risk in the mid to late years with more investments in bonds and fewer investments in stocks than the typical target-date fund.
Wilshire Associates, the System’s investment consultant for the pension assets, reviewed performance as of December 31, 2019. Pension assets were approximately $8.2 billion, and performance was positive, returning 4.5 percent for the quarter and 18 percent for the calendar year. The System’s annualized returns over the past three-, five- and 10-year periods have been 8.7 percent, 6.6 percent and 8.0 percent, respectively. Similar to Aon, Wilshire also addressed the recent market volatility and reiterated that the TVARS pension investments are well diversified and the Board should maintain a long-term perspective with respect to the System’s investment strategy and asset allocation. Wilshire also discussed steps that the pension fund has taken to be prepared for market volatility such as increasing exposure to fixed income and lower volatility equity assets, and reducing exposure to more volatile inflation sensitive assets.
The Investment Committee voted on the items listed below:
- The Board approved hiring three transition managers that may be used when buying and selling assets between managers.
- The Board approved the hiring of a long-duration fixed income manager and the termination of a commodity manager to partially fund this new fixed income portfolio.
- The Board approved updated Pension Plan and 401(k) Investment Policy statements.
Audit Committee Highlights
The Board received an update on the progress of the System’s audit, which is on track for completion in early April. Crowe, the System’s external auditor, will review the audit results with the Board at the June TVARS Board meeting.
In addition, the Board reviewed and discussed proposed amendments to the System’s Governance Policy.
Retirement Committee Highlights
The Board reviewed with Mercer, the System’s actuary, the Actuarial Valuation Report of the TVA Retirement System as of September 30, 2019. As a part of the Actuarial Valuation Report, Mercer calculated the minimum required contribution for the System for fiscal year 2021 to be $300 million under section 9B of the TVARS Rules and Regulations. The report also stated that the System’s liability for benefits declined $178 million year-over-year to $9.3 billion (calculated under accounting rule ASC960 applicable to the System) resulting in an 86 percent funding ratio as of September 30, 2019.
The Board also reviewed with Mercer the actuarial valuation of the Variable Annuity Fund as of September 30, 2019. The valuation resulted in the outstanding units of the Variable Annuity Fund being increased by 141,873 units. The increase in the number of units will result in a decrease in the Fund’s unit value, which will be applied beginning with the July 2020 payroll.
Election Committee Highlights
The Board approved the 2020 director election schedule. Under the election schedule, the deadline for candidate nominations will be July 6, 2020, and the election will be held from September 8, 2020, through September 24, 2020. The Board also approved a renewal of the election vendor contract with Election America for three additional years.
For more information, contact TVARS at 800-824-3870, 865-632-2672 or by email at firstname.lastname@example.org