Federal employees with the Tennessee Valley Authority face a major pension deficit following a loss of almost $800 million in the pension fund investment this year. The TVA, a federal agency, reached a record-breaking $6 billion shortfall in their retirement benefits system.
More than 23,000 federal retirees receive benefits from the TVA retirement system and nearly 10,000 employees continue to contribute to and rely on the retirement system for their retirement plans. As of September 30, the TVA reported assets totaling $6.8 billion, which is just more than half of what financial actuaries say the retirement plan needs to provide benefits for current TVA employees and retirees.
Retirement Benefits Are a Big Concern
Energy Market Analyst for the TVA, Leonard Muzyn Jr. told reporters that, “Employees and retirees at TVA are worried at the end of the day if they are going to get their promised benefits. We only have slightly more than half the money we need to pay for the program, and the TVA has deferred $5.4 billion to future customers to pay for these benefits. What if the competitive landscape for utilities worsens and the TVA can’t collect that money? It’s a big concern for a lot of people.”
While the deficit numbers are certainly shocking for some employees, the TVA pension fund has been struggling for the last 8 years, according to Muzyn. In response to the shortfall, TVA retirees criticized the organization for not adjusting contribution levels according to recommendations by the TVARS (Tennessee Valley Authority Retirement System). The board consists of seven members and has a fully funded separate executive retirement plan.
TVA Auditor Surprised at Lack of Funds
Dan Pitts, a retired TVA auditor expressed his surprise at the pension deficit and lack of funds needed to support the federal employee retirement plan. “I am astonished to learn that TVA’s pension is now funded at the lowest level in the history of the TVA, and that TVA’s CEO is the highest paid federal employee in the history of or nation,” Pitts said.
TVA’s CEO, Bill Johnson, earned some $6.4 million in 2015, while the TVA earned just over $1 billion. TVA paid Johnson more money than any other federal government employee received, ever.
TVA Director Pete Mahurin, told reporters that he knows the TVA needs to get the pension fund in better shape, but continued to applaud financial improvements that led to a record net income for 2015. Mahurin admitted that the TVA “needs to get our pension liabilities under control. I think we’ve got a real problem with that.” However, he offered no definable plan to help reduce those liabilities.
New Money Added not an Offset of Losses
While the TVA added $282 million to the pension plans this year, these contributions did not offset significantly losses from the plan last year and totaled less than half of what the fund paid out to retirees last year.
Not all TVA officials believe the plan is in trouble. The Chief Financial Officer of the TVA, John Thomas acknowledged a loss of 4.5 percent of the total federal retirement plan value during the year, but said that the TVA will be able to meet future payments.
Thomas told reporters, “You really have to think about the pension as a long-term investment. In the three prior years, we say earning of about 13 percent, on average. Even with the decline this year, the investment returns, on average were more than 8 percent.”
Thomas continued, “We have a 20-year funding plan for this, and we did make contributions this year and will continue to monitor this going forward… Overall we’re going to stand behind our obligations to our retirees.”
