TVARS has announced the following 2021 information of interest to employees and retirees.
Cost-of-living adjustment (COLA) for 2021
For 2021, the COLA for eligible retirees and beneficiaries will be 1.13%.
The TVARS Rules and Regulations provide that eligible retirement benefits (pension and supplemental benefits) will receive a COLA based on an inflation measure, which is 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 2018 – October 2019 to the period November 2019 – October 2020 (1.38%) minus 0.25%. Eligible retirees and beneficiaries will see the increase in checks beginning January 31, 2021.
Interest Crediting Rates for 2021
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 the TVARS Rules.
For employees with cash balance accounts who were hired prior to January 1, 1996, the interest rate for 2021 will be 6% – the calculation is equal to the change in the CPI-U (1.38%) plus 3% but not less than 6%.
For employees with cash balance accounts who were hired on or after January 1, 1996, the interest rate for 2021 will be 4.75% – the calculation is equal to the change in the CPI-U (1.38%) plus 2%, but not less than the TVARS assumed rate of investment return (6.75%) minus 2%.
For Fixed Fund accounts, the interest rate for 2021 will be 4.75% – the calculation is equal to the change in the CPI-U (1.38%) plus 2%, but not less than the TVARS assumed rate of investment return (6.75%) minus 2%.
IRS contribution limits for 2021
During 2021, employees will be able to contribute up to $19,500 to the 401(k) Plan on a pre-tax or Roth basis, which is unchanged from 2020. Employees who are age 50 or older at any time during 2021 may make additional “catch-up” contributions to the 401(k) Plan of up to $6,500 over the $19,500 limit on a pre-tax or Roth basis, which is also unchanged.
The overall contribution limit to the 401(k) Plan and the TVARS Fixed and Variable (annuity) Funds for 2021 will be $58,000, which is a $1,000 increase from 2020. 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 $58,000.
For answers to questions or for more information, please call the TVA Retirement System at 865-632-2672, or send an email to retsvcs@tva.gov.