The board of the Tennessee Valley Authority Retirement System, Knoxville, on Thursday approved a counterproposal to a TVA staff proposal that would freeze its cash balance pension plan and move current employees to the 401(k) plan, said TVA spokesman Jim Hopson.
The cash balance pension plan was established for employees hired on or after Jan. 1, 1996, and closed to new hires on July 1, 2014. The original staff proposal froze the plan and moved all participants to the 401(k) plan.
The retirement system board counterproposal fully moves only participants with less than 10 years of service to the existing 401(k) plan. TVA would contribute 6% of an employee's salary and then match 100% of employee contributions up to 6% of salary.
Those with 10 years or more of service would receive 3% of pay credits on future earnings to their cash balance accounts; they currently receive 6%. The participants would then receive a 3% automatic contribution to their 401(k) accounts in addition to the current employer match of 75% of employee contributions up to 6% of pay. Thus, the potential TVA contribution to their 401(k) accounts would rise to 7.5% from 4.5%.
The board also proposed giving current cash balance pension plan participants with more than 10 years of service the option of moving to the 401(k) plan entirely.
The original TVA staff proposal recommended contributing $275 million per year to the cash balance plan for about 20 years, in order to fully fund the plan. The counterproposal asks for the greater of $300 million per year or the minimum required contribution over the next 20 years or until it's fully funded.
The board's counterproposal also would give participants the option of receiving a full lump-sum payout upon termination of employment or retirement. That option is currently limited to a maximum of $30,000.
Both TVA management and the TVA board of directors have received the retirement system board's counterproposal and are reviewing it, Mr. Hopson said. It must be approved by the full TVA board.
As of Sept. 30, pension fund assets totaled $6.8 billion, and projected benefit obligations totaled $12.8 billion, for a funding ratio of 53.1%, according to TVA's most recent 10-K filing. The 401(k) plan has $1.9 billion in assets.