A federal appellate court has affirmed the legality of cost-of-living cuts and other changes made in 2009 by the Tennessee Valley Authority and its retirement system board to one of the South's biggest pension plans.
The Sixth Circuit Court of Appeals last week rejected a legal challenge to the pension reductions by beneficiaries of the TVA retirement plan. By a 2-1 vote, the appellate court largely upheld a ruling last year by U.S. District Judge Aleta A. Trauger dismissing claims against the retirement system for making changes in the defined benefit plan that the plaintiffs claimed were done improperly and without proper notice.
The court said TVA has given proper notice and sided with TVA and its retirement system board that future benefit changes in the plan could be made.
Jim Hovious, a member of the TVA Retirement System board who objected to the cost-of-living cuts to the TVA pension plan, said the utility broke its promises to its employees. "It is ironic that truck stop company executives who break promises to trucking companies get dragged through the federal courts [in the recent criminal prosecution of Pilot Flying J executives], yet the highest paid employees in the federal government break retirement benefit promises involving a lot more money and the federal courts rubber stamp their actions," Hovious said.
TVA has cut its cost-of-living adjustments and frozen enrollment in its defined benefit plan over the past decade to try to shore up the fiscal health of its underfunded pension, which suffered major investment losses during the Great Recession and its aftermath.
TVA's pension fund provides retirement benefits to more than 24,000 TVA retirees and their family members and covers nearly 10,000 current TVA employees. The fund had $8 billion in assets at the end of fiscal 2017, but actuaries calculate the fund should have $12.6 billion to fully meet all of its future funding obligations.
TVA has set a goal of fully funding the employee pension fund in 15 more years through annual contributions of at least $300 million.
"We take our obligations to TVA's active and retired employees seriously," TVA spokesman Scott Fiedler said after the appellate court ruling. "Last fiscal year we provided an additional one-time $500 million contribution to the TVA Retirement System, bringing the total 2017 contribution to $800 million. Investing this additional money improves the confidence of having the plan 100 percent funded."
Contact Dave Flessner at firstname.lastname@example.org or at 757-6340.
CORRECTION: TVA spokesman Scott Fiedler said recent investments by the Tennessee Valley Authority in its pension plan "improves the confidence of having the plan 100 percent funded" not "10 percent funded" as was stated in a previous version of this story. This story was updated March 21, 2018, at 10:45 p.m.