Company: TVC
Filing Date: 2025-11-13
Form Type: 10-K
Source: 0001376986-25-000056
Chunk: 277

Company: Tennessee Valley Authority
Filing Date: 2025-11-13
Form: 10-K
Item: Item 1
Chunk 277
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 the annual rate of changes in the cost of health care benefits currently provided by the post-retirement benefit plan. In establishing health care cost trend rates, TVA reviews actual recent cost trends and projected future trends considering health care inflation, changes in health care utilization, and changes in plan benefits and premium experience. 

    Cost of Living Adjustment.  COLAs are an increase in the benefits for eligible retirees to help maintain the purchasing power of benefits as consumer prices increase.  Eligible retirees receive COLAs on pension and supplemental benefits in January based on a formula linked to the Consumer Price Index for All Urban Consumers ("CPI-U") following any year in which the calculation is at least one percent.  Increases in COLA will be the percentage change in average CPI-U for the current 12-month period (November - October) compared to the average CPI-U for the previous 12-month period (November - October) for which a COLA was given, less 0.25 percent, with a 6.00 percent cap for any one year.  

TVA's COLA assumption is derived from long-term expectations of the expected future rate of inflation, based upon capital market assumptions, economic forecasts, and the Federal Reserve policy.  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.  The actual CY COLAs for 2025, 2024, and 2023 were 2.77 percent, 4.44 percent, and 6.00 percent, respectively. 

Sensitivity of Costs to Changes in Assumptions.  The following chart reflects the sensitivity of pension cost to changes in certain actuarial assumptions:

Sensitivity to Certain Changes in Pension Assumptions  Actuarial AssumptionChange in AssumptionImpact on 2025 Pension Cost(in millions)Impact on 2025 Projected Benefit Obligation(in millions)Discount rate(0.25)%$12 $241 Rate of return on plan assets(0.25)%19 N/ACost of living adjustments0.25 %20 168 

Each fluctuation above assumes that the other components of the calculation are held constant and excludes any impact for unamortized actuarial gains or losses.

Plan Investments

    In June 2025, based on current market conditions and updated capital market assumptions, the asset allocation policy was modified to progress towards the goal of reducing