The board of the Tennessee Valley Authority Retirement System, Knoxville, approved a compromise proposal from the TVA staff and its board of directors that would partially freeze its cash balance pension fund and move some current employees to the 401(k) plan effective Oct. 1, said TVA spokesman Jim Hopson.
The TVA board of directors had issued the compromise proposal April 18 in response to a retirement system board counterproposal March 3 that altered an original December proposal to freeze the plan and move all participants to the 401(k) plan. The TVARS board’s March 3 counterproposal 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.
The April 18 compromise proposal approved by the retirement system board Monday adopts those tenets of the counterproposal and also includes minor changes that do not alter basic components of the counterproposal. The board will now draw up the language of amendments to retirement system’s rules, which are scheduled to take effect on Oct. 1, and submit them to the TVA board of directors.
The changes will take effect unless the board of directors vetoes them within 30 days of the receipt of the amendments.
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 in December froze the plan and moved all participants to the 401(k) plan.
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%.
TVA will contribute the greater of $300 million per year or the minimum required contribution over the next 20 years to the cash balance plan or until it’s fully funded.
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.