PDF: U.S. Rep. Zach Wamp letterPDF: TVA IG report on pensions
The Tennessee Valley Authority didn't put enough money in its employee retirement fund while raising retiree benefits and incentives during most of the past two decades, a new audit concludes.
TVA's inspector general said the federal utility cut its share of retirement contributions in half during the 1990s and later quit making any contributions for six years, despite rising benefit expenses for TVA and increased retirement contributions by most other electric utilities.
When the market slump cut the value of TVA's investments in 2008 and 2009, the utility's once-rich retirement plan shrunk to $3 billion below what actuaries said it needed to meet future obligations. The retirement program now has about $6.6 billion program, or 83 percent of the desired level.
"These events constituted a near 'perfect storm' that created a financially unhealthy system," TVA Inspector General Richard Moore concluded in a 11-page audit released this week.
TVA moved to shore up the fund last summer with a $1 billion contribution and $300 million in benefit cuts. TVA directors last year also accepted a retirement system board plan to eliminate any inflationary increases in benefits this year and in 2012 and to limit any cost-of-living increases in 2011 and 2013.
But a group of TVA employees and retirees now is trying to raise money to sue TVA to get back what workers say were promised retirement payments.
In a letter to TVA's chairman, U.S. Rep. Zach Wamp, R-Tenn., offered support for TVA workers, who "deserve to know the retirement benefits they have worked for and were promised will be there when they need them."
Jim Hovious, a TVA engineer who lives in Soddy-Daisy, is heading up a group known as Save Our Retirement Inc., which is asking TVA employees and retirees to donate to a fund to hire attorneys to fight what they contend was an illegal change in TVA's pension benefits.
BY THE NUMBERSTVA Retirement System* 22,785 -- Number of TVA retirees covered* 12,034 -- Number of TVA employees covered* $6.6 billion -- Current value of TVA retirement system (83 percent of desired level)* $1 billion -- TVA ratepayer contribution to plan last August* $300 million -- Value of benefit reductions due to cutbacks in cost-of-living increases adopted last AugustSource: TVA Retirement System
Critics of the TVA Retirement System changes adopted last year, including the three employee representatives on the retirement board, claim TVA should make up for the shortfall in the retirement system due to investment losses. They contend the utility took advantage of earlier investment gains to reduce employer contributions from 1990 through 2009.
An independent actuary hired by the Inspector General's office questioned TVA's decision not to contribute to the fund when it was flush with cash and then failing to make up the shortfall when the plan was underfunded.
"When an employer uses those returns to fund their contributions (during market upswings), they should anticipate funding more in negative return years," the audit concluded.
But TVA Chief Financial Officer Kim Greene said "the market crash impacted all pension funds" and quickly took a plan that was 7 percent overfunded in 2007 to a plan that was 37 percent underfunded in 2009.