Company: TVC
Filing Date: 2025-11-13
Form Type: 10-K
Source: 0001376986-25-000056
Chunk: 50

Company: Tennessee Valley Authority
Filing Date: 2025-11-13
Form: 10-K
Item: Item 6
Chunk 50
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 premiums on the private exchange escalating at a lower rate than previously assumed.  Additionally, TVA recognized an $18 million actuarial gain to reflect changes in the observed and anticipated pre-Medicare per capita claims costs and contributions.  The net actuarial gains from health cost trends and observed and anticipated plan experience are recognized as an increase in the related regulatory liability and a decrease in the post-retirement obligation at September 30, 2025.  

    Cost of Living Adjustments.  COLAs are an increase in the benefits for eligible retirees to help maintain the purchasing power of benefits as consumer prices increase.  This assumption is based on the long-term expected future rate of inflation, which is based on the capital market outlooks, economic forecasts, and the Federal Reserve policy.  See Note 21 — Benefit Plans — Plan Assumptions — Cost of Living Adjustment for further discussion on the calculation of the COLA.  The actual COLA for CY 2025 was 2.77 percent.  The CY 2026 COLA is assumed to be 2.49 percent, and for years thereafter the COLA is assumed to be 2.00 percent.  A higher COLA increases the pension benefit obligation whereas a lower COLA assumption decreases the obligation.  The actual CY COLA and the long-term COLA assumption are used to determine the benefit obligation at September 30 and the net periodic benefit costs for the following fiscal year.

Mortality.  TVA's mortality assumptions are based upon actuarial projections in combination with actuarial studies of the actual mortality experience of TVARS's pension and post-retirement benefit plan participants taking into consideration the Society of Actuaries ("SOA") mortality table and projection scales as of September 30, 2025.  TVA continues to monitor the availability of updates to mortality tables, longevity improvement scales, and mortality reviews and experience studies to consider whether these updates should be reflected in the current year mortality assumption. 

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    The following tables illustrate the estimated effects of changing certain of the critical actuarial assumptions discussed above, while holding all other assumptions constant and excluding any impact for unamortized actuarial gains and losses:

Sensitivity to Certain Changes in Pension Assumptions(in millions) Actuarial AssumptionActual AssumptionChange in AssumptionImpactEffect on 2025 pension expense:Discount rate4.95 %(0.25)%$12 Expected return on assets6.50 %(0.25