TVA's top boss says he hears a lot of concerns about the utility's underfunded pension plan from not only his employees, but also from TVA customers and investors.
While TVA's labor unions and employee representatives on the TVA Retirement System board want TVA to put more money into the employee pension fund and preserve retirement benefits, those who pay TVA bills worry that making up the $6 billion shortfall will push up electric rates and make TVA noncompetitive with its power rates.
"Every time I talk with our bond holders, investors or major customers lately, they ask about our pension program," TVA CEO Bill Johnson said Tuesday. "It's not just employees and retirees who are worried."
Johnson insists TVA will honor its commitment to employees and retirees, but he said some changes are necessary to help TVA make up a pension shortfall that grew to $6 billion last year after investment losses failed to keep pace with rising expenses.
TVA's Retirement System, which provides benefits for more than 33,000 retirees, employees and their families, reported assets of $6.8 billion and liabilities of $12.8 billion at the end of fiscal 2015. With only 53 percent of the money that actuaries say the pension fund needs to meet future obligations, TVA and the TVA Retirement System (TVARS) board are negotiating changes to both trim some future benefit costs and increase TVA contributions to the plan.
"We've been looking for a way that is fair to everyone involved - the retirees, the employees and the ratepayers," Johnson said. "As stewards of the public's money, we have to be fair to those who pay our bills as well as our employees and retirees."
TVA began switching new employee hires last year to a matching defined contribution plan to replace the pension program and proposed in December a plan to provide future benefits for all employees with less than 20 years' experience in the form of 401(k) matching contributions, rather than additional pension benefits.
By capping cost-of-living increases and limiting some guaranteed returns, TVA expects to trim its pension liability by $700 million.
Under the 20-year plan outlined to TVARS directors, TVA has agreed to contribute at least $275 million a year - or $5.5 billion over the next two decades - even while making matching contributions to employee-directed 401(k) plans of up to 12 percent for employees for whom future pension benefits are frozen.
According to the Employee Benefit Research Institute, the average private sector employer matches 3 percent of an employee's pay. Even in the utility industry which tends to provide richer benefits to attract skilled workers, the 12 percent match being proposed is generous, Johnson said.
"We agreed to provide a 9 percent match" for contributions to the 401(k) plan for new employees hired starting in July 2014 (without any defined benefit pension) and "we haven't had any trouble attracting qualified applicants as a result," Johnson said.
The share of American workers with defined benefit pensions like what TVA provides has shrunk from 28 percent in 1979 to less than 3 percent today, according to EBRI data.
TVA labor unions have objected to the proposed pension changes, however, claiming TVA workers are having to sacrifice while Johnson and other executives at TVA continue to get performance bonuses and supplemental retirement payments that make them among the highest paid federal employees in America.
"The TVA Retirement System's pension is very important to most employees," TVARS board member Leonard Muzyn Jr., told the TVA Retirees Association last month. "TVARS pension is not important to top executives coming in from the outside."
Muzyn said putting more money as requested by TVARS into the underfunded pension "means less money left over for bonuses" for top managers who he said "continue to chip away" at pension benefits.
The seven-member TVARS board has promised to decide on TVA's proposed changes by the end of February.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.