TVARS has announced the following 2023 information of interest to employees and retirees.
Cost-of-living adjustment (COLA) for 2023
For 2023, the COLA for eligible retirees and beneficiaries will be 6%.
The TVARS Rules and Regulations provide that eligible retirement benefits (pension and supplemental benefits) will receive a COLA benefit based on a formula using the Consumer Price Index – All Urban Consumers (CPI-U) – an index maintained by the U.S. Labor Department that measures the price changes in a broad group of various goods and services purchased by consumers. Under the TVARS Rules, the COLA is calculated as the percentage change in the average CPI-U for the period of November 2020 – October 2021 to the period November 2021 – October 2022 (8.04%) minus 0.25%, with a cap of 6%. Eligible retirees and beneficiaries will see the increase in checks beginning January 31, 2023.
This is the first time in over 30 years the cap in the formula has determined the maximum COLA benefit (prior to 2016 the cap was 5%). The 6% maximum in the formula provides a high level of vested COLA benefit during this current period of higher inflation while also helping to protect TVARS’ ability to pay all retirement benefits to retirees and beneficiaries over the life of the System.
Interest Crediting Rates for 2023
Cash balance (pension) accounts receive interest credits on a monthly basis and Fixed Fund (annuity) accounts receive interest credits on a daily basis and these interest crediting rates are set for each calendar year according to formulas in the TVARS Rules.
- For employees with cash balance accounts who were hired prior to January 1, 1996, the interest rate for 2023 will be 10%.
- For employees with cash balance accounts who were hired on or after January 1, 1996, the interest rate for 2023 will be 6.25%.
- For Fixed Fund accounts, the interest rate for 2023 will be 6.25%.
For employees with cash balance accounts who were hired prior to January 1, 1996, the calculation is equal to the change in the 12-month average CPI-U plus 3% (but not less than 6% nor greater than 10%).
For employees with cash balance accounts who were hired on or after January 1, 1996, and for Fixed Fund accounts, the calculation is equal to the change in the 12-month average CPI-U plus 2% (with a floor of 4.75% and a ceiling of 6.25% based on a formula in the TVARS Rules).
IRS contribution limits for 2023
During 2023, employees will be able to contribute up to $22,500 to the 401(k) Plan on a pre-tax or Roth basis, which is an increase of $2,000 from 2022. Employees who are age 50 or older at any time during 2023 may make additional “catch-up” contributions to the 401(k) Plan of up to $7,500 over the $22,500 limit on a pre-tax or Roth basis.
The overall contribution limit to the 401(k) Plan and the TVARS Fixed and Variable (annuity) Funds for 2023 will be $66,000, which is a $5,000 increase from 2022. This overall limit includes the following contributions: (i) employee pre-tax, Roth, and after-tax contributions to the 401(k) Plan; (ii) TVA’s matching and non-elective (automatic) contributions to the 401(k) Plan; and (iii) employee after-tax contributions to the TVARS Fixed and Variable (annuity) Funds (subject to a separate $10,000 limit) for employees hired before January 1, 1996, who are eligible to contribute to those funds. Any “catch-up” contributions made by employees age 50 or older to the 401(k) Plan do not count toward the overall contribution limit of $66,000.
For answers to questions or for more information, please call the TVA Retirement System at 800-824-3870, or send an email to firstname.lastname@example.org.