TVA Retirement System New Employee Overview

Transcription

1 TVA Retirement System New Employee Overview

2 Where Do You Want To Go? 2

3 Retirement System Background Established 1939 Serving +/- 35,000 members Governed by 7 member board Elected by Membership (3) Appointed by TVA (3) Selected by TVARS Board of Directors (1) James Hovious Tammy Wilson Tony Troyani John M. Hoskins Allen Stokes Leonard D. Muzyn Brian Child 3

4 An Overview 1. Cash Balance Benefit Structure (pension) Calculation Growth Monthly Benefit 2. Supplemental l Benefit (k) Savings & Deferral Plan Plan Features Contributions Investment options 4. Fixed and Variable Funds 5. Social Security benefits 4

5 Where Are the Sources of Retirement Income? Saving and planning now can make a big difference in your lifestyle after retirement. Here are the potential sources of retirement income 1 : What you have the most control over 60% Savings & Other 20% Pensions 20% Social Security 1 Social Security Administration 2004, Income of the Population 65 or Older using highest quintile $40,982 per year and higher

6 Pension: Cash Balance Plan Pay Credits (6% of Base Pay) Plus Interest Credits (Currently 6%) Equals Cash Balance Account Cash Balance Account Grows Salary increase Time (Interest) 6

7 Pension: Vesting & Types of Benefits When am I eligible for a benefit? Must stay at least 5 years to be eligible (vested) What type of benefit could I receive? Immediate retirement benefit Deferred retirement benefit Cash-out/Rollover to IRA * Deat th Disabi ility * Cash-out/Rollover subject to limitations. 7

8 Pension: Growth Example Assumptions - Employee age 25 - Pay Credits $ Annual Salary $40,000 - Salary Growth of 3% annually - Biweekly Pay $1, Interest Rate 6% $401,800 $180,800 $273, $115, $14,700 $36,700 $68,900 5 Years Contributions & interest 8

9 Pension: Monthly Benefit Example Retirement Age 55 Years of Service 30 $ 273,200 = $ 1,560 /month 175 Retirement Age 60 Years of Service 35 $ 401,800 = $ 2,670 /month 150 9

10 Supplemental Benefit Supplemental benefit Employed at least until actual age 55 Plus At least 10 years of service Eligible for Supplemental Benefit Calculated as: Years of service X $ Plus $94.20 additional monthly benefit 10

11 Your Personal Savings 60% Savings & Other 20% Pensions 20% Social Security 401(k) Savings and Deferral Plan Fixed & Variable Funds 11

12 401(k): Plan Features Key Features of TVA s 401(k) Plan Payroll Deduction Money Grows Tax Deferred May Lower Federal Income Taxes Roth Investment Option TVA Match Plan is Portable You Control Your Own account Loan Provisions 12

13 401(k): Plan Features Automatic Enrollment Automatically enrolled at 6% Takes effect in 30 days Enrolled in Fidelity Freedom Fund based on age 13

14 401(k): Plan Features Taxes Before Tax After Tax Roth Income tax now on contributions No Yes Yes Tax at withdrawal 1 on contributions Yes No No Tax at withdrawal 1 on earnings Yes Yes No 1 Subject to IRS guidelines. Limits Before-Tax After-Tax Roth Standard $17,500 $51,000* $17,500 Catch-up (age 50 or over) $5, N/A $5, Overall before-tax and/or Roth limit *Overall limit for contributions and match $17,500 or $23,000 (w/ catch-up) $51,000 overall 14

15 401(k): Contribution Methods Before- After- Roth Tax Tax Payroll deduction Yes Yes Yes Change contributions anytime Lump sum No Yes No Matching Yes Yes Yes Rollover of another Before and/or After- Tax plan Rollover of another Roth plan Yes Yes No No No Yes 15

16 401(k) Matching Funds For every $1.00 that you contribute to the 401(k) Plan, TVA will match that t dollar with 75 or 25 1 Your contribution (6% of $40,000) 000) $ 2,400 TVA match (75% of $2,400) Vested after 3 years $ 1,800 Total Contribution $ 4,200 1 Up to 4.5% of fiscal year-to-date base salary. Cash Balance members receive 75 per $1.00 contributed, while Original Benefit Structure members receive 25 per $1.00 contributed. 2 With contributions to the 401(k) Plan, subject to TVARS Rules & Regulations. 16

17 401(k): Growth Example Assumptions - Salary $40,000 - Salary growth of 3% annually - 4.5% match (75 per $1) -6% pre-tax contributions - 6% investment return $326,200 $207,900 $124,400 $66,300 $26,600 5 Years

18 401(k): Investment Options You choose how to invest Ready Mix 13 Fidelity Freedom Funds 62 Core Funds Short-term, term, bond, stock funds Fidelity BrokerageLink Wide variety of mutual funds and individual securities 18

19 401(k): Fidelity Freedom Funds 8% 5% Domestic Equity Freedom 2015 International Equity 42% Retiring in 34% Invest Grade Bond 5 Years High Yield Bond 11% Short-Term Freedom 2020 Retiring in 10 Years 2% 10% 7% 7% Freedom % 17% 52% Retiring in 25 Years 66% 13% 19

20 Fixed & Variable Funds Key Features of TVA s Fixed & Variable Funds Fixed: Annual rate of 6% Variable: Based on S&P 500 Index $10, annual limit it No automatic ti enrollment Payroll or lump sum contributions No matching 20

21 Fixed & Variable Funds Taxes Income tax now on contributions Tax at withdrawal 1 on contributions Tax at withdrawal 1 on earnings 1 Subject to IRS guidelines. After- Tax Yes No Yes 21

22 Fixed & Variable Funds: Growth Example Assumptions 5 - Salary $40,000 - Salary growth of 3% annually - 6% payroll contributions - 6% investment return $202,900 $130,500 $79,300 $37,900 $15,200 5 Years

23 Social Security How are you eligible? Work for 40 quarters or 10 years When are you eligible? Eligible for a reduced benefit as early as age 62 What can affect Social Security? Increase in salary, which would increase amount going into Social Security 23

24 Review: Your TVA Benefits 1 2 Vested in 5 years Actual age % funded by TVA Immediate Deferred Cashout Cash Balance Pension 10 years of service 100% funded by TVARS Supplemental Benefit 24

25 Review: Your TVA Benefits 3 4 Immediate eligibility Fixed Fund: 6% TVA match Vested for match in 3 years 401(k) Variable Fund: S&P 500 After-Tax Fixed & Variable Funds Before-Tax After-Tax Roth 25

26 Review: More Information Fidelity website t Account balances Fund exchanges Fund performance Educational info Planning tools Retirement website General information FAQs Financial calculators Beneficiary forms Planning tools Aon Hewitt website Account balances Pay Credits Interest t Credits TVARS by phone: (865) or (800)