The biggest labor unions representing employees of the Tennessee Valley Authority are balking at a plan to revamp and trim pension benefits for agency employees and retirees, claiming the utility’s leaders are punishing workers while getting fat paychecks and retirement benefits themselves.
But TVA President Bill Johnson insists changes and caps in retirement benefits are needed to close a $6 billion funding shortfall without having to raise electric rates in the Tennessee Valley.
TVA has proposed a 20-year plan to pump another $5.5 billion into its retirement program and cut the fund’s liabilities by $700 million by capping some future cost-of-living and supplemental benefits and by switching future benefit payments to a 401(k) program.
Leaders of the TVA Engineering Association met last week with congressional staffers in Washington, D.C., to object to the proposed changes. They urged Congress to do more to help secure the future of the TVA retirement program, which covers more than 33,000 people.
Gay Henson, president of the Engineering Association, IFTPE Local 1937, questioned why executives were paid bonuses and retirement supplements last year from the utility’s record $1.1 billion in profits, while nothing was done to address the pension shortfall for most workers and retirees.
“This is a federal government corporation, but those who work in the executive suite are lining their pockets like TVA is their personal business while forcing ‘austerity’ on front-line employees,” Henson said. “It’s wrong. It’s shortsighted. It may be illegal — and if it’s not, it should be.”
Last month, the regional head of the electricians union, IBEW District 10 Vice President Brent Hall, accused utility bosses of trying to shore up the retirement plan “on the backs of working men and women at TVA.”
Johnson, the highest paid federal employee in America, with a compensation package last year of $6.4 million, said the rank-and-file retirement plan needs changes to ensure benefits for future workers while avoiding rate increases.
In a recent letter to TVA retirees, Johnson said “minor reductions” in future cost-of-living increases, combined with a minimum $275 million-a-year contribution to the fund, “brings certainty to both retirees and TVA” and are needed “to improve the long-term sustainability and health” of the pension program and the agency.
“In my view, doing nothing is not an option,” Johnson said. “TVA still has one of the highest operating and maintenance expenses among utility peers.”
Johnson has cut about 2,000 jobs and trimmed more than $500 million in annual operating expenses since being named TVA CEO three years ago. He froze the current pension plan and has proposed an employer match of up to 12 percent of workers’ pay. But that match could change in future years, especially since new employees are given only a 9 percent match for their 401(k) plans.
Under his proposed changes, many workers would be forced out of a defined-benefit pension plan into individual 401(k) accounts. Henson said the proposed changes might mean employees couldn’t transfer pension credits if they choose to work for another federal agency.
Any changes must be approved by the seven-member TVA Retirement System Board, which includes employee-elected and management-appointed members. A decision is expected before the end of the month, and TVA directors could approve changes at their April board meeting.
Leonard Muzyn Jr., a certified financial analyst at TVA who has served on the retirement system board for 12 years, told the TVA Retirees Association that Johnson’s proposed changes may not be sufficient to shore up the underfunded plan.
“The trust and feeling of security with the old TVA era has been replaced with a crisis of confidence and feeling of insecurity with the new TVA era,” he said.
Muzyn complained to the Times Free Press about the lack of TVA funding for the pension plan in a November interview. He said his supervisor told him six days later not to talk to the media because “she did not want me to lose my job.”
More than 3,000 TVA employees and retirees have signed an online petition asking Congress to investigate the pension plan to help ensure their benefits are secure.
Unlike other federal agencies, TVA’s retirement program isn’t backed by the government. And it’s not covered as private companies are by the Employee Retirement Income Security Act (ERISA), which sets minimum standards for pensions in exchange for a government guarantee of promised benefits.
The editors of Pensions and Investments magazine, a trade publication that covers retirement plans in the private and public sector, have urged that TVA be brought under the supervision of the Department of Labor and the Internal Revenue Service through ERISA regulations.
“TVA doesn’t have rigorous oversight of its financial controls or the market discipline of shareholder oversight and activist investors,” the magazine said in an editorial in its January issue.
Tennessee’s U.S. senators acknowledge some changes will likely be needed to shore up TVA’s underfunded pension plan.
But neither Bob Corker nor Lamar Alexander, both Republicans, expressed any immediate interest in additional congressional oversight or legislative changes to regulate the plan. Both said that is up to the utility’s nine-member board, which is appointed by the president and confirmed by the U.S. Senate.
“We are well aware that TVA’s pension system is significantly underfunded and reforms are necessary,” Corker spokeswoman Tara DiJulio said last week.
“While we do not inject ourselves in the decision making of the board, we understand that we will be hearing from those affected by these proposals and look forward to those conversations.”
Source: Times Free Press