BENEFITS PRACTICE 7

Retirement

WHAT

The TVA Retirement System (System) offers a comprehensive program of retirement benefits to eligible TVA employees. This program includes:

• A TVA-funded pension benefit and supplemental benefit provided through the Original Benefit Structure or the Cash Balance Benefit Structure.
• A Savings and Deferral Retirement Plan [401(k) Plan].
• Fixed and Variable Funds - two after-tax investment options.
• A disability pension benefit for participating employees who are vested and become unable to continue working at TVA due to disability.
• A death benefit that pays the employee's beneficiary a benefit if the employee dies before retirement.

WHO

These employees are automatically members of the TVA Retirement System:

• Full-time annual employees who are employed for a pre-determined period of more than six months.
• Part-time annual employees on non-temporary appointments who work at least 16 hours a week.

These employees are not members of the TVA Retirement System:

• Members of the TVA Board of Directors.
• Full-time annual employees whose appointments are for six months or less.
• Part-time annual employees who work less than 16 hours a week.
• Hourly employees.
• Employees who have less than a four-day break in service from employment with another federal agency, who were covered by the Civil Service Retirement System or the Federal Employees Retirement System with the other agency and whose TVA appointment is not temporary. These employees remain covered by their existing retirement system rather than becoming covered by the TVA Retirement System.

WHY

TVA Retirement System benefits are designed to assist members in achieving the goal of economic security in retirement.

HOW

TVA contributes to the Retirement System such amounts as are necessary on an actuarial basis to provide the System with assets sufficient to meet TVA-financed benefit obligations to be paid to members. This amount is determined annually by the System's Board of Directors and approved by the TVA Board of Directors. TVA also matches the Social Security tax contributions of its employees. Members may contribute to the Fixed and Variable Funds to supplement their retirement income. Additionally, members are given an opportunity to save in the 401(k) Plan. Members may receive limited 401(k) Plan matching contributions from TVA.

 

All retirement benefit determinations are governed by the Rules and Regulations of the TVA Retirement System.

 

Benefits and investment of assets are administered by the seven-member Board of Directors of the TVA Retirement System.

ENROLLMENT

All eligible employees are provided an enrollment form for Retirement System benefits by their human resource representative when they join TVA or accept a position covered by the TVA Retirement System. This enrollment form explains the opportunities available to participants in the Original Benefit Structure or the Cash Balance Benefit Structure and requires a designation of beneficiary for all members.

VESTING

Vested members of the Retirement System are eligible for a TVA-funded pension benefit through the Original Benefit Structure or the Cash Balance Benefit Structure. A member is vested when he or she completes the service requirement necessary within their benefit structure to be eligible for a TVA-funded pension benefit. For participants in the Original Benefit Structure, five years of creditable service* is necessary for vesting purposes. For participants in the Cash Balance Benefit Structure, five years of service as a member of the Retirement System is necessary to be vested.

TVA FUNDED PENSION BENEFIT

Original Benefit Structure (OBS)

Eligibility for an Immediate Retirement Benefit

Vested members may elect to receive an immediate retirement benefit, regardless of age, if they leave TVA for any reason other than termination for cause. Vested members who are at least age 55 and leave TVA for any reason are always eligible to receive an immediate retirement benefit.

Eligibility for a Deferred Retirement Benefit

 

Members with five or more years of creditable service* may elect to defer their monthly pension benefit. This deferred benefit may begin as early as attained age 55, but no later than April 1 of the calendar year after the year the member reaches age 70-1/2.

 

Determining the Amount of the Pension Benefit

 

The amount of this benefit, which is a fixed monthly payment financed by TVA, is determined by three factors:

• Number of years of creditable service* at retirement
• High three year average monthly base salary
• A pension factor

 

*For Retirement System members who are participants in the Original Benefit Structure, creditable service is the length of time spent as a member of the Retirement System. However, creditable service includes credit for any annual leave forfeited after January 1, 1980 and, at the member's election, credit for any unused sick leave. If this total is 1,000 hours or less, the member receives hour-for-hour credit of additional service. A two-for-one hour credit is given for hours in excess of 1,000. A deposit may also be made to obtain credit for eligible pre-TVA employment military service. In addition, credit for any annual leave forfeited after January 1, 1980 and, at the member's election, credit for any unused sick leave is added to actual age to determine the member's attained age.

 

Cash Balance Benefit Structure

Eligibility for an Immediate Retirement Benefit

 

Vested members may elect to receive an immediate retirement benefit, regardless of age, if they leave TVA for any reason other than termination for cause. Vested members who are at least actual age 55 and leave TVA for any reason are always eligible to receive an immediate retirement benefit.

Eligibility for a Deferred Retirement Benefit

Members with five years or more of actual service* may elect to defer their monthly pension benefit. This deferred benefit may begin as early as actual age 55, but no later than April 1 of the calendar year after the year the member reaches age 70 1/2.

 

Determining the Amount of the Pension Benefit

 

The amount of this benefit, which is a fixed monthly payment financed by TVA, is determined by two factors:

• Value of the cash balance account at retirement
• A pension factor  

 

RETIREMENT SYSTEM FUNDED SUPPLEMENTAL BENEFIT

At retirement, members who meet the eligibility criteria listed below will receive a supplemental benefit to assist them with the cost of their medical insurance (although it is not required to be used to pay for medical insurance). This supplemental benefit, which is a vested benefit, is reported to the IRS as taxable income.

Eligibility Requirements for Employees Terminating Before January 1, 2009

• Actual age 50 at termination with 10 years of actual service* (benefit begins upon retirement), or
• Actual age 45 at termination with 10 years of actual service* and the employee receives an involuntary reduction-in-force notice (benefit begins at actual age 50)

 

 

Eligibility Requirements for Employees Terminating On or After January 1, 2009

• Actual age 55 at termination with 10 years of actual service* (benefit begins upon retirement), or
• Actual age 50 at termination with 10 years of actual service* and the employee receives an involuntary reduction-in-force notice (benefit begins at actual age 55).

 

Amount of the Supplemental Benefit

• As of January 1, 2007, the supplemental benefit was $10.8090 per month for each full year of actual Retirement System service at retirement, with the minimum benefit being calculated for 10 years. An additional amount was added to this benefit effective January 1, 2007.  As of January 1, 2007, the additional amount is $87.96.
• The supplemental benefit receives an annual cost-of-living adjustment (COLA) each January based on the increase in the Consumer Price Index. The COLA will stop when the supplemental benefit has reached $15 per month for each full year of actual service, and when the additional amount reaches $150 per month.

 

*Actual service is defined as the length of time spent as a member of the TVA Retirement System, not including credit for unused sick leave, forfeited annual leave, or pre-TVA employment military service.

 

FIXED AND VARIABLE FUNDS

 

Contributions
These after-tax funds are available to participants in the Original Benefit Structure or participants in the Cash Balance Benefit Structure who were members of the System as of December 31, 1995 if they did not previously transfer their funds to the 401(k) Plan on or after May 1, 2005.

 

Investment Options
The TVA Retirement System offers members a choice between two after-tax investment options for their contributions:

• The Fixed Fund, which earns a specified rate of interest determined by the System's Board of Directors, or
• The Variable Fund, which is invested in the Spartan U.S. Equity Index Fund.

 

Employees can split their contributions between the two funds or choose to invest all of their contributions in one fund or the other. In addition, employees may transfer their total balance to the 401(k) Plan anytime during employment. However, if this transfer occurs on or after May 1, 2005, additional contributions to the annuity will not be permitted.

 

Amount of Benefit
This benefit is determined by the amount of the member's contributions to the Fixed and Variable Funds and the amount of earnings on those contributions. Members who first became a TVARS member before January 1, 1996, have a choice of receiving this benefit as either a lump-sum payment at retirement or a monthly payment for life.  Members who first became a TVARS member on or after January 1, 1996, may not elect to receive a monthly benefit.

 

Withdrawal of Annuity Balance
Members may withdraw their contributions and the earnings on those contributions if they leave TVA, but the earnings withdrawn may be subject to taxes and an IRS early distribution penalty.

 

SAVINGS AND DEFERRAL RETIREMENT PLAN [401(k) PLAN]

 

TVA offers all Retirement System members the option of participating in the 401(k) Plan. This plan, which is administered by Fidelity Investments, provides the opportunity to save on a before-tax, after-tax, or Roth 401(k) basis in a variety of different investment options. Participants in the Cash Balance Benefit Structure are eligible to receive TVA matching contributions of 75 cents for each dollar with maximum matching contributions of 4.5 percent of fiscal year-to-date base compensation. Participants in the Original Benefit Structure are eligible to receive TVA matching contributions of 25 cents on each dollar contributed with maximum contributions of 1.5 percent of fiscal year-to-date base compensation. The 401(k) Plan also offers a loan feature. Members who participate in the 401(k) Plan may choose from various distribution options at termination.

 

After-Tax - Contributions to this account are made on an after-tax basis, but all earnings in this account are tax-deferred until the year the money is distributed to the member.

 

Before-Tax - The amount of annual salary deferred to this account and any investment earnings are excluded from federal income tax until the year the money is distributed to the member.

 

Roth- The contributions to this account are made on an after-tax basis, but included in before-tax limits, and all earnings on the contributions are tax-free upon a qualified withdrawal.

 

Matching - The amount of contributions to the matching account and any investment earnings are excluded from federal income tax until the year the money is distributed to the member. You must have 3 years of actual service to be vested in the TVA matching contributions. Actual service is defined as the length of time spent as a member of the TVA Retirement System, not including credit for unused sick leave, forfeited annual leave or pre-TVA employment military service.

 

DISABILITY BENEFITS

 

Vested members may retire on a disability retirement if it is determined that they cannot continue in their present position because of a physical or mental disability that is likely to be permanent and there is no other TVA position available for which they are qualified and can perform within their medical restrictions.

 

DEATH BENEFITS

 

The designated beneficiary or the estate of a member who dies in service will receive the member's accumulated contributions plus interest and a TVA provided death benefit.

 

NONVESTED MEMBER'S RETIREMENT BENEFITS

 

A member who terminates from a covered position with six months of service or less automatically receives a refund of his/her accumulated contributions in the annuity funds, if applicable. A member who has more than six months but less than five years of service is eligible for a similar refund of any annuity balance, or the balance may be left in the System for not longer than one year, accumulating interest until withdrawn.

 

Nonvested members who participate in the 401(k) Plan may choose from various distribution options at termination. Any matching contributions would be forfeited and not eligible for distribution.

 

ROLES

Employees

• Complete the enrollment form for Retirement System benefits coverage.
• Elect to participate in the annuity, if eligible and interested.
• Elect to participate in the 401(k) Plan, if interested.
• Keep beneficiary information up to date.

 

Retirement Specialists

• Provide written communication materials upon request.
• Provide retirement benefit estimates upon request.
• Provide retirement consultations to employees upon request.
• Answer questions about retirement benefit plans.
• Conduct group informational meetings.

 

Human Resource Representatives

• Answer general questions regarding retirement benefits.

RESOURCES

• Retirement Specialists
• Human Resource Representatives
• Retirement Services:
  • Phone - (865) 632-2672 or (800) 824-3870
  • Web Site – www.tvars.com
  • E-Mail - retsvcs@tva.gov
• Retirement Information System - (865) 632-7575
• Fidelity Retirement Benefits Line [401(k) Plan] - (800) 354-7121

 

BENEFITS
PRACTICE 7

 

Retirement

 

Last Revised 7/07