Retirement System Board Approves Rule Changes

August 17, 2009

The TVA Retirement System (TVARS) Board held a special called board meeting today and approved some changes to the Rules and Regulations of the System.

These changes are contingent upon TVA contributing $1 billion into the System for fiscal year 2010 and as an advance on its contributions through fiscal year 2013. TVA can utilize the current low-interest-rate environment to borrow money at attractive rates.

This $1-billion infusion would be used to fund the vested benefits of the System. This would provide the System with an immediate 20-percent increase in assets. A billion dollars invested would help stabilize the fund, increasing it to a funded ratio of about 78 percent, up from its current funding ratio of 65 percent.

The $1-billion contribution, along with the liability reductions of approximately $300 million, would reduce the System deficit from approximately $3 billion to $1.7 billion.

“One billion dollars today with some temporary changes in the cost-of-living adjustments would give the System the cash it needs to make approximately $575 million in annual benefit payments without liquidating securities” says Frank Alford, chair of the TVARS Board. “If you are waiting on the market to recover, accepting $1 billion from TVA versus the previously recommended $300 million clearly is a better option.”

Temporary changes for current retirees

Retirees will see the following temporary changes in how their COLA (cost-of-living adjustment) will be determined. These changes apply only to the next four years:

  • For calendar year 2010, the COLA will be zero.
  • For calendar year 2011, the COLA will be the change in the Consumer Price Index (CPI), capped at 3 percent.
  • For calendar year 2012, the COLA will be zero.
  • And for calendar year 2013, the COLA will be the change in the CPI, capped at 2.5 percent. 

At the end of this four-year period, the current COLA benefit of CPI, capped at 5 percent, will be restored. These changes were made temporary to consider the possibility of the markets recovering after four years.

Changes for current employees retiring on or after Jan. 1

Current employees who retire on or after Jan. 1, 2010, will be eligible to receive a COLA at actual age 60.

In addition, the interest crediting rate for the Fixed Fund balances and future contributions will be reduced to 6 percent from 7.25 percent, effective Jan. 1, 2010.

No change was made to the 8 and 3/8 percent Fixed Annuity Fund conversion rate or any other benefits.

Investment professionals added to serve as advisors

The TVARS Board has also approved changes to the Rules to add investment professionals to its Investment Committee as advisors.

This is in addition to Wilshire Consulting, the System’s current financial advisor.

Contact Retirement Services with questions

The Retirement System is very important to all employees and retirees.

While any change in benefits is difficult, both TVA and the TVARS Board are committed to stabilizing the financial soundness of the System for the future benefit of members and beneficiaries. 

Employees who have questions about these changes can contact Retirement Services by e-mail at retsvcs@tva.gov or by phone at 632-2672, 1-800-824-3870 or the TTY line at 632-7576.



HomeForms and DocumentsBoardContact UsPrivacy PolicyDisclaimer