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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13, 15(d), or 37 of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2024
TENNESSEE VALLEY AUTHORITY
(Exact name of registrant as specified in its charter)
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A corporate agency of the United States created by an act of Congress (State or other jurisdiction of incorporation or organization) | | 000-52313 (Commission file number) | | 62-0474417 (IRS Employer Identification No.) |
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400 W. Summit Hill Drive Knoxville, Tennessee (Address of principal executive offices) | | | | 37902 (Zip Code) |
(865) 632-2101
(Registrant's telephone number, including area code)
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On May 9, 2024, the Board of Directors (the “Board”) of the Tennessee Valley Authority (“TVA”) adopted the TVA Employee Compensation Board Practice ("Board Practice") to clarify the roles and responsibilities of the Board, the People and Governance Committee, and management with respect to compensation matters. In addition, the Board approved amended and restated versions of the following compensation plans to, among other things, reflect the principles set forth in the Board Practice:
•TVA Compensation Plan
•Executive Annual Incentive Plan ("EAIP")
•Long-Term Incentive Plan ("LTIP")
•Executive Severance Plan ("ESP")
•Supplemental Executive Retirement Plan
•Restoration Plan
•Deferred Compensation Plan
The amended and restated EAIP, LTIP, and ESP also reduced the amounts that TVA's Chief Executive Officer ("CEO") may receive under these plans.
•Under the EAIP, the maximum scorecard achievement for the CEO under the plan was reduced from 200 percent to 150 percent.
•Under the LTIP, the maximum scorecard achievement for the CEO under the plan was reduced from 200 percent to 150 percent.
•Under the ESP, the severance multiple for the CEO was reduced from 1.5 to 1.0, and the cash separation payment to the CEO for a separation covered by the ESP was reduced from (1) the product of (a) the severance multiple times (b) the sum of salary and the target EAIP award to (2) the product of the severance multiple times salary.
Copies of the amended and restated compensation plans, which also include minor administrative revisions, are attached as exhibits to this report and are incorporated herein by reference. The foregoing descriptions are qualified in their entirety by reference to such documents.
Item 9.01 Financial Statements and Exhibits.
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| EXHIBIT NO. | DESCRIPTION OF EXHIBIT |
| 10.1 | Amended and Restated TVA Compensation Plan Approved by the TVA Board on May 9, 2024 |
| 10.2 | Amended and Restated Executive Annual Incentive Plan Approved by the TVA Board on May 9, 2024 |
| 10.3 | Amended and Restated Long-Term Incentive Plan Approved by the TVA Board on May 9, 2024 |
| 10.4 | Amended and Restated Executive Severance Plan Approved by the TVA Board on May 9, 2024 |
| 10.5 | Amended and Restated Supplemental Executive Retirement Plan Approved by the TVA Board on May 9, 2024 |
| 10.6 | Amended and Restated Restoration Plan Approved by the TVA Board on May 9, 2024 |
| 10.7 | Amended and Restated Deferred Compensation Plan Approved by the TVA Board on May 9, 2024 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| Tennessee Valley Authority |
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| Date: May 9, 2024 | /s/ John M. Thomas, III |
| John M. Thomas, III |
| Executive Vice President and |
| Chief Financial and Strategy Officer |
EXHIBIT INDEX
These exhibits are filed pursuant to Item 5.02 hereof.
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| EXHIBIT NO. | DESCRIPTION OF EXHIBIT |
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COMPENSATION PLAN
Amended and Restated May 2024
Tennessee Valley Authority
Compensation Plan
Principles
Authority
The Tennessee Valley Authority (“TVA”) Compensation Plan provides the framework for Management, the People and Governance Committee (or any successor committee with responsibility for compensation matters), and the Board of Directors of the Tennessee Valley Authority (“Board”) to establish and manage compensation for all TVA employees in a manner that is in compliance with the Tennessee Valley Authority Act of 1933, as amended (“TVA Act”). The Board approves the Compensation Plan and ensures that it is consistent with the TVA Act and TVA’s strategic goals.
The TVA Act provides that the Board will approve and establish a compensation plan for TVA employees which:
•Specifies all compensation (including salary or any other pay, bonuses, benefits, incentives, and any other form of remuneration) for the Chief Executive Officer (“CEO”) and TVA employees;
•Shall be based on an annual survey of the prevailing compensation for similar positions in private industry, including engineering and electric utility companies, publicly owned electric utilities, and Federal, State, and local governments; and
•Shall provide that education, experience, level of responsibility, geographic differences, and retention and recruitment needs will be taken into account in determining compensation of employees.
The TVA Act also provides that:
•The Board shall approve all compensation (including salary or any other pay, bonuses, benefits, incentives, and any other form of remuneration) of all managers and technical personnel that report directly to the CEO (including any adjustment to compensation);
•On the recommendation of the CEO, the Board shall approve the salaries of employees whose annual salaries would be in excess of the annual rate payable for positions at Level IV of the Executive Schedule; and
•The CEO shall determine the salary and benefits of employees whose annual salary is not greater than the annual rate payable for positions at Level IV of the Executive Schedule.
The Compensation Plan is reviewed annually to ensure consistency and alignment with TVA’s mission and strategic goals. The Compensation Plan includes the following key elements:
Philosophy
TVA’s Compensation Philosophy is based on certain statutory requirements and is designed to attract, engage, and retain highly skilled and coveted employees needed to accomplish the agency’s broad mission. Under the TVA Act, TVA has its own personnel system; however, employees are public servants.
In their service, many employees are called on to accomplish specialized aspects of TVA’s mission safely, reliably, and efficiently, and must have the requisite education, experience, and professional qualifications. These requirements make it necessary for TVA to offer compensation opportunities that enable TVA to attract, retain, and fully engage highly qualified candidates for positions similar to those in relevant industries.
Performance-based compensation is critical to TVA in achieving its strategic goals. A key component of the Compensation Philosophy is a strong orientation toward “pay for performance,” which rewards continuous improvement in TVA’s overall performance as well as that of individual business units and individual participants.
TVA’s Compensation Philosophy emphasizes a structured, market-based, and performance-based approach to determining pay levels and incentive opportunities. For those positions requiring specialization, compensation is designed to be competitive with the sectors from which TVA would recruit and those likely to recruit TVA employees.
•Compensation is targeted at the median (50th percentile) of the applicable labor market for talent for most positions.
•Compensation may be targeted above the median of the relevant labor market (typically between 50th and 75th percentiles) for certain positions due to market scarcity, recruitment and retention issues, or other business reasons.
•Compensation may be targeted below the median of the relevant labor market for certain positions due to incumbent experience, position scope, or other business reasons.
Competitive compensation levels are determined using relevant labor market data obtained through surveys and public filing reviews and validated through recruitment and periodic supplemental benchmark activities.
Additionally, compensation for TVA trades and labor employees is based on prevailing pay for similar work. Section 3 of the TVA Act requires the prevailing rate of wages for work of a similar nature prevailing in the vicinity be paid to laborers and mechanics whether employed by contractors or directly by TVA. Compensation for other represented employees is based on total compensation levels, market rates, practices, and methods of payment for similar work in the relevant labor market consistent with applicable labor agreements.
TVA’s Employee Benefits program offers a competitive benefits package to attract and retain the workforce required for TVA to achieve its mission successfully while prudently managing costs, ensuring optimum use of benefit dollars, engaging employees and retirees to become informed consumers, and partnering in managing benefit costs.
TVA sponsors two qualified retirement plans for eligible employees, a defined benefit pension plan and a defined contribution (401(k)) plan, which provide competitive benefits in the relevant labor market. Certain executives in critical positions may also participate in a non-qualified retirement plan that provides supplemental benefits at compensation levels that are higher than the limits specified by IRS regulations.
Strategy
Compensation Basis
Executives, Management & Specialist, and Excluded Employees
In accordance with the TVA Act, the level of compensation for Executives, Management and Specialists will be based on annual market survey data that represent prevailing competitive compensation for similar positions in private industry, including engineering and electric utility companies, publicly owned electric utilities, and Federal, State, and local governments.
Non-management and specialist employees who are not covered by one of TVA’s bargaining units due to the sensitive and confidential nature of their work are categorized as Excluded Employees. Compensation for employees in this category will be based on annual market survey data that represent prevailing competitive compensation for similar positions in the relevant labor market. Compensation for Excluded Employees will be targeted, in general, at the median of the relevant labor market for all positions.
Represented Employees
Trades and Labor Represented Employees
TVA annually conducts a wage survey within a specified geographic vicinity and negotiates with the Trades and Labor project agreement Council representing contractor employees from multiple building trades unions to establish an agreed upon prevailing wage rate. Any dispute over what the rate should be may be appealed to the Secretary of Labor under the TVA Act for a final decision. TVA contractors are required to pay these prevailing rates, and unions provide craftspersons to the contractor’s job at these rates. The same total wage package applies to all work sites.
TVA also annually conducts a prevailing wage survey for work performed by TVA Trades and Labor employees directly. The prevailing wage rate is negotiated between TVA and the Annual Council representing multiple unions and the Teamsters for jobs each represents. Disputes over the prevailing rate may be appealed to the Secretary of Labor.
Salary Policy Represented Employees
As required by labor agreements, surveys, published data, and/or other sources are reviewed annually by TVA and the applicable unions to negotiate compensation budgets and pay adjustments. Disputes over monetary issues are resolved through binding arbitration.
Candidate Sourcing and Relevant Labor Markets
External recruiting areas are defined for specialized segments of TVA’s employees based on the most likely sources of qualified candidates and the sectors in which TVA is most vulnerable to external recruitment activities.
External recruitment sources for the most senior levels of Management (CEO, direct reports to the CEO, and other select executives) consist of both private and publicly-owned companies in the energy services industry that have similar revenue and scope as TVA due to the criticality of industry-specific knowledge, experience, and professional qualifications in carrying out the duties of these positions.
However, some positions which have less need for industry-specific knowledge and experience may have recruitment areas in general industry and governmental entities in addition to the energy services industry and public power.
External recruitment areas for other segments of TVA employees may include general industry, governmental entities, energy services companies, and investor-owned utilities.
Relevant labor markets for other segments of TVA employees are frequently reviewed and will reflect consideration of potential recruiting sources, external recruiting threats, geographic scope of recruitment activities, type of business/industry, type of position, etc.
Sources of Competitive Market Compensation Information
Competitive market compensation information is obtained from a variety of sources including:
•Published and custom compensation surveys reflecting the relevant labor markets identified for designated positions; and
•Publicly disclosed information from a custom peer group of energy services companies of comparable size and business complexity as reviewed and approved by the People and Governance Committee annually.
The competitive market compensation information is used to:
•Test competitiveness of compensation level and opportunity by position;
•Serve as a point-of-reference for establishing pay packages for recruiting executives; and
•Inform appropriate adjustments to compensation levels and opportunities to maintain the desired degree of market competitiveness.
The development of competitive market references that reflect the primary sources of candidates does not limit the potential candidates to those sources. For example, the fact that the market reference for a position reflects median compensation for energy services companies simply informs as to the likely pay levels necessary to attract and retain talent for that position and should not limit TVA’s recruiting efforts to energy services companies.
Compensation Components
Total direct compensation consists of the following components: 1) Salary, 2) Short-Term Incentive, and 3) Long-Term Incentive. Salary is considered a “fixed” compensation component that represents the annual base salary or rate of pay provided to an employee to reward day-to-day contributions to TVA.
The Short-Term Incentive and Long-Term Incentive are variable and/or “at-risk” compensation components. At TVA, the Short-Term Incentive is generally paid through the Winning Performance Team Incentive Plan or the Executive Annual Incentive Plan. It represents the primary element used to reward accomplishments against established business and individual goals within a given fiscal year. TVA provides Long-Term Incentive through the Long-Term Incentive Plan to TVA officers, executives, and key positions based on market prevalence. The Long-Term Incentive Plan focuses employees on longer-term performance and retention goals, and eligible participants may receive one or both components.
Consistent with TVA’s philosophy of tying pay to performance, the mix of fixed and variable pay components varies by level of position. In general, as the scope and responsibility of a position increases, the percentage of pay that is variable or at-risk also increases.
Pay for Performance
A key feature of the Compensation Plan is a strong orientation toward pay for performance for all employees. The at-risk, pay for performance elements play a substantial role in executive pay and are guided by TVA’s business strategy to ensure appropriate alignment between accountability and motivation/reward. The Compensation Plan also seeks to strike the appropriate balance between achieving short-term annual results and ensuring TVA’s long-term success and viability.
TVA’s incentive plans are linked to strategic priorities emphasizing improvements in TVA’s overall performance. The range of incentive opportunity for TVA executives is calibrated to the degree of difficulty in achievement of specific goals.
TVA continuously reviews the goals and measures that are used in its pay for performance plans to ensure they support the achievement of TVA’s strategic goals. Generally, it is the intention of TVA that changes to the goals and measures will not be made during or at the conclusion of the performance period; however, the Board retains the right to do so, in its discretion. Through pay for performance, the Compensation Plan recognizes individual performance and focuses attention on the achievement of business goals that are important to customers and the people TVA serves. TVA’s Short-Term Incentive achieves this objective through the use of a scorecard, while TVA’s Long-Term Incentive emphasizes a performance orientation by typically targeting a majority portion of long-term compensation in the form of at-risk, performance-based compensation tied to the achievement of measurable, predetermined goals.
Roles
Vice President and Chief Human Resources Officer
•Recommends the TVA Compensation Plan to provide the framework for TVA Management, the CEO, the People and Governance Committee, and the Board to
manage compensation for all TVA employees in a manner which is in compliance with the TVA Act.
All other Roles and Responsibilities are delineated in the TVA Board Practice TVA Employee Compensation.
Specific Guidance for Compensation Consultant
The following guidance shall apply to describe the function and role of the People and Governance Committee’s independent compensation consultant:
•The People and Governance Committee (on behalf of the Board and pursuant to its Charter) has the sole authority to retain and terminate the compensation consultant, including sole authority to approve the consultant’s fees and other retention terms.
•Any such compensation consultant or advisor shall report directly to the People and Governance Committee with respect to matters within the scope of the committee’s responsibilities. The compensation consultant works for the committee, not TVA’s management, with respect to executive compensation matters and is not expected to seek management’s approval before any materials are provided to the People and Governance Committee (or other Board members) for review. Specifically, any review of CEO pay, with or without recommendations, should go to the Chair of the People and Governance Committee first, without prior review by management.
•The People and Governance Committee recognizes that its consultant will necessarily work with representatives of management on executive compensation and other matters within the scope of the committee’s responsibilities. When doing so, however, the consultant will act as the committee’s representative and solely on the committee’s behalf.
•At least once each year, the People and Governance Committee will meet in executive session with its consultant, without management present, to discuss compensation philosophy and the committee’s goals and objectives for the next year.
•The People and Governance Committee will evaluate the performance of its compensation consultant. Among other factors, the committee will consider the committee’s continued confidence in the integrity, objectivity, and independent judgment of the representative of the consultant assigned to the engagement along with his or her understanding of the public service nature of TVA.
•In a new relationship, the People and Governance Committee will often request that the consultant provide a high-level review of TVA’s executive pay program, highlighting any atypical or uncompetitive pay practices or plan features that should be reviewed in detail. It is incumbent on the consultant to uncover potential problem areas that need to be addressed.
Exhibit 10.2
EXECUTIVE ANNUAL INCENTIVE PLAN
Amended and Restated as of May 9, 2024
Prepared by: /s/ Rebecca Tolene 5-9-24
Rebecca Tolene, VP and Chief of Staff Date
Validation Date: 05/09/2024
Review Frequency: 3 years
Validated By: Stephen Gaby
TABLE OF CONTENTS
Page
1. PURPOSE AND SCOPE..................................................................................................... 1
1.1 Establishment.................................................................................................... 1
1.2 Purpose............................................................................................................. 1
2. DEFINITIONS..................................................................................................................... 1
2.1 “Authorized Parties”........................................................................................... 1
2.2 “Corporate Multiplier”......................................................................................... 1
2.3 “Corporate Performance Goals”........................................................................ 1
2.4 “Corporate Performance Measures”.................................................................. 1
2.5 “EAIP Award”..................................................................................................... 1
2.6 “EAIP Incentive Opportunity”............................................................................. 1
2.7 “Individual Performance Multiplier”.................................................................... 2
2.8 “Participant”....................................................................................................…2
2.9 “Performance Cycle”.......................................................................................... 2
2.10 “Plan Year”......................................................................................................... 2
2.11 “Retirement”....................................................................................................... 2
2.12 “SBU”................................................................................................................. 2
2.13 “SBU Performance Goals”................................................................................. 2
2.14 “SBU Performance Measures”........................................................................... 2
2.15 “Scorecard Achievement”.................................................................................. 2
2.16 “Section 409A”................................................................................................... 2
2.17 “Separation from Service”................................................................................. 2
2.18 “Target EAIP Award”.......................................................................................... 2
2.19 “Total Cash Compensation”............................................................................... 3
3. PARTICIPATION................................................................................................................. 3
4. PERFORMANCE CYCLE................................................................................................... 3
5. PERFORMANCE MEASURES AND GOALS..................................................................... 3
5.1 Corporate Performance Measures and Goals................................................... 3
5.2 SBU Performance Measures and Goals............................................................ 3
6. DETERMINATION OF AWARDS........................................................................................ 4
6.1 Eligibility and Vesting........................................................................................ 4
6.2 EAIP Incentive Opportunity............................................................................... 4
6.3 Scorecard Achievement.................................................................................... 4
6.4 Corporate Multiplier........................................................................................... 5
6.5 Individual Performance Multiplier...................................................................... 5
6.6 Award Calculation............................................................................................. 5
6.7 Maximum Payout.............................................................................................. 5
6.8 Award Adjustment............................................................................................. 6
6.9 Change in Position............................................................................................ 6
6.10 Termination Prior to End of Performance Cycle................................................ 6
7. PAYMENT OF AWARDS..................................................................................................... 6
8. DEFERRAL ELECTION OPTION....................................................................................... 7
8.1 Eligibility for Deferral for Existing Participants................................................... 7
8.2 Eligibility for Deferral for New Participants........................................................ 7
9. PLAN ADMINISTRATION................................................................................................... 8
9.1 Authority of Plan Administrator.......................................................................... 8
9.2 Determinations by Plan Administrator............................................................... 9
10. AMENDMENT OR TERMINATION OF THE PLAN.......................................................... 9
11. GENERAL PROVISIONS.................................................................................................. 9
11.1 Board Delegations............................................................................................. 9
11.2 Non-Transferability of Rights and Interests....................................................... 9
11.3 Sources of Payments....................................................................................... 10
11.4 Severability....................................................................................................... 10
11.5 Limitation of Rights........................................................................................... 10
11.6 Titles................................................................................................................. 10
11.7 Governing Law.................................................................................................. 10
11.8 Authorized Representatives.............................................................................. 11
11.9 Certain Rights and Limitations.......................................................................... 11
11.10 Compliance with Section 409A......................................................................... 11
11.11 Tax Withholding................................................................................................. 11
1.PURPOSE AND SCOPE
1.1Establishment. The Tennessee Valley Authority (“TVA”) hereby amends and restates in its entirety its short-term incentive program for officers and executives, which shall be known as the “Executive Annual Incentive Plan” (“EAIP” or “Plan”). The Plan supports TVA’s compensation philosophy, which is designed to attract, retain, and engage employees needed to accomplish TVA’s broad mission.
1.2Purpose. The Plan is designed to encourage and reward TVA officers and other Participants for their performance and contribution to the successful achievement of financial, operational, and individual goals.
This is accomplished by linking a significant element of variable annual compensation to the accomplishment of selected short-term financial, operational, and individual performance standards. The Plan, in conjunction with salary, provides total annual compensation opportunities similar to those found at competing companies, thus assisting TVA in retaining and recruiting executive talent critical to TVA’s success.
2.DEFINITIONS
Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:
2.1“Authorized Parties” means the TVA Board of Directors (“Board”) or its designees.
2.2“Corporate Multiplier” means the adjustment to the EAIP Award based on the consideration of certain corporate factors and events that are significant during the Performance Cycle but not included or captured by the Corporate Performance Measures and Goals.
2.3“Corporate Performance Goals” means the annual goals established for each Corporate Performance Measure.
2.4“Corporate Performance Measures” means the specific metrics used to measure performance at the corporate level.
2.5“EAIP Award” means the actual dollar amount awarded to a Participant under the EAIP.
2.6“EAIP Incentive Opportunity” means the award opportunity expressed as a percent of the Participant’s salary.
2.7“Individual Performance Multiplier” means the adjustment to the EAIP Award based on the eligible Participant’s individual achievements and performance.
2.8“Participant” means TVA employees eligible to receive an award under the EAIP.
2.9“Performance Cycle” means the period of time over which performance is measured for the purpose of awarding incentives.
2.10“Plan Year” means TVA’s fiscal year (October 1 through September 30).
2.11“Retirement” and like phrases mean an employee has met one of the following criteria: (i) the employee has reached the age of 55 with at least 10 years of full-time TVA service, (ii) the employee has reached the age of 60 with at least five years of full-time TVA service, or (iii) the employee is in the Civil Service Retirement System or Federal Employees Retirement System and is eligible for an immediate retirement benefit upon termination as outlined in the applicable plan.
2.12“SBU” means a Strategic Business Unit within TVA.
2.13“SBU Performance Goals” means the annual goals established for each SBU Performance Measure.
2.14“SBU Performance Measures” means the specific metrics used to measure performance at the SBU level.
2.15“Scorecard Achievement” means the level of performance compared to the approved performance measures and performance goals over the Performance Cycle (expressed as a percentage of performance).
2.16“Section 409A” means Section 409A of the Internal Revenue Code and the regulations and other binding guidance thereunder.
2.17“Separation from Service” and like phrases shall have the meaning set forth in 26 C.F.R. §1.409A-1(h), as such provision may be amended from time to time.
2.18"Target EAIP Award” is the product of the Participant’s base salary (at the time an EAIP Incentive Opportunity is approved in accordance with this Plan) and the Participant’s EAIP Incentive Opportunity.
2.19“Total Cash Compensation” means the Participant’s compensation that includes salary plus EAIP Award.
3.PARTICIPATION
An Authorized Party shall approve individual employees as Participants in accordance with delegations approved by the Board.
Eligibility is limited to officers and key managers serving in jobs within the Officer/Executive pay band.
4.PERFORMANCE CYCLE
The EAIP performance cycle follows TVA’s fiscal year (October 1 through September 30).
5.PERFORMANCE MEASURES AND GOALS
The Plan incorporates the use of performance measures that focus primarily on the achievement of TVA’s short-term financial and/or operational goals in key areas essential for the achievement of TVA’s strategic objectives. Performance measures and goals are evaluated over the one-year period of the Performance Cycle. Performance measures, performance measure weighting, and the identification of performance goals for each performance measure will be (1) established for each Performance Cycle by the Board or its designee and (2) communicated by an Authorized Party.
The Board will generally set performance measures and goals within the first 90 days of the Performance Cycle. It is the intention of TVA that changes to the performance measures and goals will not be made during or at the conclusion of the Performance Cycle; however, the Board retains the right to do so in its discretion. The results of the performance measures and goals are approved for each Performance Cycle by the Board.
5.1 Corporate Performance Measures and Goals. The Plan uses Corporate Performance Measures and Goals, which focus on key areas essential for the achievement of TVA’s strategic priorities.
5.2 SBU Performance Measures and Goals. The Plan may also use SBU Performance Measures and Goals, which focus on key areas essential for top performance in identified SBUs. When SBU Performance Measures and Goals are used for a Performance Cycle:
5.2.1 These measures will be focused on a balance among responsibility, rates, and reliability.
5.2.2 Achievement of the SBU Performance Measures and Goals is used in the determination of EAIP Awards for all Participants in TVA organizations that have SBU Performance Measures and Goals.
5.2.3 The SBU Performance Measures and Goals for each SBU will vary depending on the type of organization and its particular goals within TVA’s strategic objectives.
5.2.4 Participants who are employed in organizations that are not tied to a specific set of SBU Performance Measures and Goals will have EAIP Awards determined based on the achievement of Corporate Performance Measures and Goals.
6.DETERMINATION OF AWARDS
6.1Eligibility and Vesting. To be eligible for an EAIP Award, the Participant must (1) be a TVA employee at the end of the Performance Cycle and (2) have been employed for a minimum of 90 consecutive days during the Performance Cycle. Participants with an annual performance review rating of “Unsatisfactory” are not eligible for an award.
Participants who meet eligibility requirements and fall into one of the following categories will receive a pro-rated award:
•Employed for less than the full Plan Year, or
•Leave Without Pay (“LWOP”) for more than 30 days during the Plan Year (unless LWOP is due to a service-related injury or active military duty).
For the avoidance of doubt, a Participant has a vested right to an EAIP Award either (1) when they meet the eligibility requirements as defined above or (2) when they are entitled to an EAIP Award under Section 6.10.
6.2EAIP Incentive Opportunity. Annual EAIP Incentive Opportunities for each Participant are established based on market data, level of responsibility, and relationship with other TVA positions in order to ensure a consistent approach among TVA organizations. Annual EAIP Incentive Opportunities under the Plan are designed to align each position’s Total Cash Compensation with relevant labor market practices. EAIP Incentive Opportunities for each Participant are approved in accordance with delegations approved by the Board.
6.3Scorecard Achievement. Scorecards have goals that are essential to TVA success and may include goals around performance of fleet
assets, reliability to customers, TVA’s impact on the environment, and overall financial and operational performance. Scorecards can result in a payout for all Participants other than the CEO ranging from 0% to 200% depending on performance and can result in a payout for the CEO ranging from 0% to 150% depending on performance.
6.4Corporate Multiplier. The overall incentive payout may be adjusted based on the consideration of certain corporate factors and events that are significant during the Performance Cycle but not included or captured by the Corporate Performance Measures and Goals. The Board will establish performance measures and goals for the Corporate Multiplier. The Board will qualitatively assess performance on the Corporate Multiplier measures and determine the final Corporate Multiplier, which will range from zero (0) to one point one (1.1), after the end of each fiscal year. The Corporate Multiplier will then be multiplied by the performance results of the Scorecard Achievement to determine the EAIP Award payouts for Participants.
6.5Individual Performance Multiplier. Actual EAIP Awards for eligible Participants may be adjusted, up or down, by an individual’s supervisor/manager based on an evaluation of the Participant’s individual achievements and performance over the Performance Cycle within a range of 0% to 150%. Final awards for all Participants will be approved in accordance with delegations approved by the Board.
6.6Award Calculation. EAIP Awards for Participants other than the CEO are calculated as follows:
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EAIP Award (225% Max) | = | Salary | X | Position’s EAIP Incentive Opportunity % | X | Scorecard Achievement (0% - 200%) | X | Corporate Multiplier (0-1.1) | X | Individual Performance Multiplier
(0% - 150%) |
EAIP Awards for the CEO will be calculated in the same manner except that the Scorecard Achievement will range from 0% to 150% instead of 0% to 200%.
6.7Maximum Payout. The maximum payout after all factors are applied is 225% of the Participant’s Target EAIP Award except for the CEO, whose maximum payout is 150% of the CEO’s Target EAIP Award (the “Maximum Payout”). In the event that the Participant’s EAIP Award calculation (as illustrated in Section 6.6) exceeds the Maximum Payout, the Participant’s award will be adjusted not to exceed the Maximum Payout.
6.8Award Adjustment. EAIP Awards for any or all Participants may be adjusted further by the Board in its discretion.
6.9Change in Position. Awards are based on the Participant’s base salary, the EAIP Incentive Opportunity assigned to the Participant’s position, and TVA’s achievement of performance measures and goals for the Performance Cycle. Participants who have a change in salary, incentive opportunity, or scorecard during a Performance Cycle as a result of a change in position or reclassification will have their EAIP Award calculated based on time in each position, salary, incentive opportunity, and/or scorecard during the Performance Cycle. Participants who change their full-time/part-time status during the Performance Cycle will receive a prorated EAIP Award based on time spent at part time and full time during the Performance Cycle.
6.10Termination Prior to End of Performance Cycle. Participants who meet the eligibility requirements (e.g., employed 90 consecutive days during the Performance Cycle) and terminate employment with TVA before the end of the Performance Cycle for reasons that are beyond the Participant’s control and acceptable to TVA may be eligible to receive a pro-rated EAIP Award.
Participants who meet the eligibility requirements (e.g., employed 90 consecutive days during the Performance Cycle) and terminate employment with TVA before the end of the Performance Cycle for reasons that are voluntary or who are terminated “for Cause” are not eligible for any EAIP Award.
If a Participant is terminated during the Performance Cycle and the participant is eligible for Retirement (as defined by Section 2.11), the Participant’s eligibility for an EAIP Award shall be unaffected and the Participant will remain eligible for a prorated EAIP Award, if any, available to the Participant under the EAIP plan upon Separation from Service. If eligible for Retirement, leaving for other reasons does not impact right to receive payment.
7.PAYMENT OF AWARDS
Except in the case of deferral, EAIP Awards will be paid in a lump sum during the first quarter of the next fiscal year following the Plan Year in which the awards are earned, typically late November to early December, but in no event will the EAIP Awards be paid later than December 15. EAIP Awards will be approved by an Authorized Party prior to payment in accordance with delegations approved by the Board. Each EAIP Award shall be paid in cash after deducting the amount of applicable federal, state, and local withholding taxes of any kind required by law to be withheld by TVA.
8.DEFERRAL ELECTION OPTION
Participants may defer the payment of EAIP Awards under the Plan in accordance with the criteria set forth below:
8.1Eligibility for Deferral for Existing Participants. Participants who are employed by TVA before the performance measures and goals for a Performance Cycle have been established may be eligible to elect to defer all or a portion of any eligible EAIP Award for a Performance Cycle to the TVA Deferred Compensation Plan under the following conditions:
8.1.1The deferral election must be made before the first day of the Performance Cycle;
8.1.2The deferral election is irrevocable as of the date set forth in Section 8.1.1 above;
8.1.3The deferral must be made in 1 percent increments of the actual EAIP Award;
8.1.4Before the deferral election becomes irrevocable, the participant must elect to have deferred amounts paid out in accordance with the options set forth in the TVA Deferred Compensation Plan; and
8.1.5The Participant performs services at TVA continuously from the date the Participant’s performance measures and goals are established through the date the deferral election is made.
8.2Eligibility for Deferral for New Participants. Participants who become eligible to participate in the Plan after the performance measures and goals for a Performance Cycle have been established and who have not at any time previously been eligible to participate in the Plan or in any other plan required to be aggregated and treated with the Plan as a single plan under Section 409A may be eligible to elect to defer a portion of any eligible EAIP Award for that Performance Cycle to the TVA Deferred Compensation Plan under the following conditions:
8.2.1The deferral election must be made within thirty (30) days after the date the Participant becomes eligible to participate in the Plan;
8.2.2The deferral is irrevocable as of the date set forth in Section 8.2.1 above;
8.2.3The deferral must be made with respect to 1 percent increments of the actual EAIP Award;
8.2.4The deferral election applies only with respect to compensation paid for services to be performed after the election is made; and
8.2.5Before the deferral election becomes irrevocable, the Participant must elect to have deferred amounts paid out in accordance with the options set forth in the TVA Deferred Compensation Plan.
9.PLAN ADMINISTRATION
9.1Authority of Plan Administrator. The Plan shall be administered by the CEO or the designee of the CEO (the “Plan Administrator”) unless otherwise delegated by the Board. When the CEO is a Participant, the Board or its designee shall be the Plan Administrator with respect to matters affecting the CEO. Subject to the express provisions of the Plan, the Plan Administrator shall have the power, authority, and sole and exclusive discretion to construe, interpret, and administer the Plan, including without limitation, the power and authority to make factual determinations relating to, and correct mistakes in, EAIP Awards and to take such other action in the administration and operation of the Plan as the Plan Administrator deems appropriate under the circumstances, including but not limited to the following:
9.1.1The Plan Administrator may, from time to time, prescribe forms and procedures for carrying out the purposes and provisions of the Plan.
The Plan Administrator shall have the authority to prescribe the terms of any communications made under the Plan, to interpret and construe the Plan, any rules and regulations under the Plan, and the terms and conditions of any EAIP Award, and to answer all questions arising under the Plan, including questions on the proper construction and interpretation of the Plan.
9.1.2The Plan Administrator may (1) notify each Participant that he or she has been selected as a Participant and (2) obtain from each Participant such agreements and powers and designations of beneficiaries as the Plan Administrator shall reasonably deem necessary for the administration of the Plan.
9.1.3To the extent permitted by law, the Plan Administrator may at any time delegate such powers and duties to one or more other executives or managers, whether ministerial or discretionary, as the Plan Administrator may deem appropriate, including but not limited to, authorizing the Plan Administrator’s delegate to execute documents on the Plan Administrator’s behalf.
9.2Determinations by Plan Administrator. All decisions, determinations, and interpretations by the Plan Administrator regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of or operation of any EAIP Award, shall be final and binding on all Participants, beneficiaries, heirs, or other persons holding or claiming rights under the Plan or any EAIP Award. The Plan Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, in making such decisions, determinations, and interpretations including, without limitation, the recommendations or advice of an Authorized Party or any other employee of TVA and such consultants and accountants as it may select.
10.AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Plan without the consent of any Participant, beneficiary, or other person; provided that TVA and the Plan Administrator, after any such termination, shall continue to have full administrative powers to take any and all action contemplated by the Plan which is necessary or desirable and to make payment of any outstanding awards earned by Participants in accordance with the terms of the Plan. No amendment or termination of the Plan may adversely affect, other than as specified in the Plan, any right acquired by any Participant or any beneficiary under an EAIP Award vested before the effective date of such amendment or termination. Upon termination of the Plan, distribution of vested EAIP Awards shall be made to Participants and beneficiaries in the manner and at the time described in Section 7, unless an Authorized Party determines in its sole discretion that all such amounts shall be distributed upon termination of the Plan.
11.GENERAL PROVISIONS
11.1Board Delegations. Approvals regarding awards under the Plan for each Participant, such as the Target EAIP Award opportunity and the amount of actual awards, will be made in accordance with delegations approved by the Board.
11.2Non-Transferability of Rights and Interests. Neither a Participant nor a beneficiary may alienate, assign, transfer or otherwise encumber his or her rights and interests under the Plan. No such interest or right to receive a distribution may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person, and any attempt to do so shall be null and void. In the event of a Participant’s death, the Plan Administrator shall authorize payment of any EAIP Award due a Participant under the Plan to the Participant’s beneficiary.
11.3Sources of Payments. All EAIP Awards shall be payable out of TVA’s general assets. Each Participant’s or beneficiary’s claim, if any, for the payment of an EAIP Award shall not be superior to that of any general and unsecured creditor of TVA. Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust of any kind or a fiduciary relationship between TVA and any Participant, beneficiary, or other person. If an error or omission is discovered in any of the determinations, the Plan Administrator shall cause an appropriate equitable adjustment to be made in order to remedy such error or omission.
11.4Severability. In the event that any provision or portion of the Plan shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of the Plan shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
11.5Limitation of Rights. Nothing in the Plan shall be construed to give any employee any right to be selected as a Participant or to receive an EAIP Award or to be granted an EAIP Award other than as is provided in this document. Nothing in the Plan or any EAIP Award issued pursuant to the Plan shall be construed to limit in any way the right of TVA to terminate a Participant’s employment at any time, without regard to the effect of such termination on any rights such Participant would otherwise have under the Plan, or give any right to a Participant to remain employed by TVA in any particular position or capacity or at any particular rate of remuneration. During the lifetime of the Participant, only the Participant (or the Participant’s legal representative) may exercise the rights and receive the benefits of any EAIP Award.
11.6Titles. The titles of the sections herein are included for convenience of reference only and shall not be construed as part of the Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine. Such words as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.
11.7Governing Law. TVA is a corporate agency and instrumentality of the United States, and the Plan shall be governed by and construed under federal law. In the event federal law does not provide a rule of decision for any matter or issue under the Plan, the law of the State of Tennessee shall apply; provided, however, in no event shall Tennessee’s choice of law provisions apply.
11.8Authorized Representatives. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized representative of TVA.
11.9Certain Rights and Limitations. The establishment of the Plan shall not be construed as conferring any legal rights upon any employee or other person for a continuation of employment, nor shall it interfere with the rights of TVA to discharge any employee and to treat any employee without regard to the effect that such treatment might have upon that employee as a Participant in the Plan.
11.10Compliance with Section 409A. At all times, to the extent Section 409A applies to amounts deferred under the Plan: (i) the Plan shall be operated in accordance with the requirements of Section 409A; (ii) any action that may be taken (and, to the extent possible, any action actually taken) by an Authorized Party, the Plan Administrator, and the Participants or their beneficiaries shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (iii) any provision in the Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (iv) any provision that is required by Section 409A to appear in the Plan that is not expressly set forth shall be deemed to be set forth herein, and the Plan shall be administered in all respects as if such provision were expressly set forth herein. The payments of EAIP Awards, to the extent no deferral election is made, are intended to be interpreted, operated, and administered in a manner consistent with the short-term deferral exemption from Section 409A. No provision of the Plan is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid hereunder, and TVA shall not, under any circumstances, have any liability to a Participant or Beneficiary for any taxes, penalties, or interest due on amounts paid or payable under the Plan, including taxes, penalties, or interest imposed under Section 409A.
11.11Tax Withholding. TVA is authorized to withhold from any EAIP Award taxes due or potentially payable in connection with any transactions involving the Plan and to take any other actions TVA may deem advisable to allow TVA to satisfy obligations for the payment of withholding taxes and other tax obligations related to any EAIP Award.
Exhibit 10.3
LONG-TERM INCENTIVE PLAN
Amended and Restated as of May 9, 2024
Prepared by: /s/ Rebecca Tolene 5-9-24
Rebecca Tolene, VP & Chief of Staff Date
Validation Date: 05/09/2024
Review Frequency: 3 years
Validated By: Stephen Gaby
TABLE OF CONTENTS
Page
1. PURPOSE AND SCOPE..................................................................................................... 1
1.1 Establishment.................................................................................................... 1
1.2 Purpose............................................................................................................. 1
2. DEFINITIONS..................................................................................................................... 2
2.1 “Beneficiary”...................................................................................................... 2
2.2 “Disability”.......................................................................................................... 2
2.3 “Long-Term Performance Incentive Award”....................................................... 2
2.4 “Long-Term Performance Incentive Grant”........................................................ 2
2.5 “Long-Term Performance Incentive Opportunity”.............................................. 2
2.6 “Long-Term Retention Incentive Grant”............................................................. 2
2.7 “Performance Cycle”......................................................................................... 3
2.8 “Performance Goals”......................................................................................... 3
2.9 “Performance Measures”................................................................................... 3
2.10 “Retention Cycle”............................................................................................... 3
2.11 “Retirement”....................................................................................................... 3
2.12 “Scorecard Achievement”.................................................................................. 3
2.13 “Section 409A”................................................................................................... 3
2.14 “Separation from Service”.................................................................................. 3
3. PARTICIPATION.................................................................................................................. 4
3.1 Performance Component................................................................................... 4
3.2 Retention Component........................................................................................ 4
4. PERFORMANCE MEASURES AND GOALS..................................................................... 4
5. DETERMINATION OF GRANTS AND AWARDS................................................................ 5
5.1 Grant Frequency................................................................................................ 5
5.2 Calculation of Grants and Awards..................................................................... 5
5.3 Vesting............................................................................................................... 6
5.4 Awards Payable for Termination Prior to Vesting............................................... 7
6. PAYMENT OF AWARDS..................................................................................................... 9
6.1 Performance Component.................................................................................. 9
6.2 Retention Component....................................................................................... 9
6.3 Death................................................................................................................ 10
6.4 Disability............................................................................................................ 10
6.5 Retirement........................................................................................................ 10
Page
7. DEFERRAL ELECTION OPTION....................................................................................... 10
7.1 Eligibility for Deferral for Existing Participants.................................................. 10
7.2 Eligibility for Deferral for New Participants....................................................... 11
8. PLAN ADMINISTRATION................................................................................................... 11
8.1 Authority of Plan Administrator.......................................................................... 11
8.2 Determinations by Plan Administrator............................................................... 12
9. AMENDMENT OR TERMINATION OF THE PLAN............................................................ 13
10. GENERAL PROVISIONS................................................................................................. 13
10.1 Board Delegations............................................................................................ 13
10.2 Non-Transferability of Rights and Interests...................................................... 13
10.3 Source of Payments......................................................................................... 13
10.4 Severability....................................................................................................... 14
10.5 Limitation of Rights........................................................................................... 14
10.6 Titles................................................................................................................. 14
10.7 Governing Law................................................................................................. 14
10.8 Authorized Representatives............................................................................. 14
10.9 Compliance with Section 409A........................................................................ 15
10.10 Tax Withholding................................................................................................ 15
1.PURPOSE AND SCOPE
1.1 Establishment. The Tennessee Valley Authority (“TVA”) hereby amends and restates in its entirety its long-term incentive plan, which shall be known as the Long-Term Incentive Plan (“Plan”). This Plan supports TVA’s compensation philosophy, which is designed to attract, retain, and engage employees needed to accomplish TVA’s broad mission.
1.2 Purpose. The purpose of the Plan is to provide a targeted level of total long-term compensation that is comprised of both (1) a variable, at-risk performance-based component (the “Performance Component”) and (2) a retention component (the “Retention Component”). The Plan is designed to provide a competitive level of total compensation to eligible participants (each, a “Participant”).
Participants may be selected for enrollment in one or both components of the Plan. For a Participant who is enrolled in both components, the Performance Component will typically target a majority portion of the Participant’s total long-term compensation. The remaining portion will be provided under the Retention Component.
1.2.1 Performance Component. The Performance Component is designed to provide Participants with time-vested incentive opportunities based on successful achievement of established financial and/or operational goals measured over a three-year period. This component is intended to provide performance incentives to Participants similar to the performance incentive provided by long-term performance stock or performance cash awards in publicly traded companies.
1.2.2 Retention Component. The Retention Component is designed to provide Participants with time-based incentive opportunities designed to encourage them to remain with TVA. This component is intended to provide retention incentives to Participants similar to the retention incentive provided by restricted stock or restricted stock units in publicly traded companies.
2. DEFINITIONS
Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:
2.1 “Beneficiary” means the Participant’s surviving spouse, unless the Participant designates one or more persons or entities to be the Participant’s Beneficiary. The Participant may make, change, or revoke a Beneficiary designation at any time before his or her death without the consent of the Participant’s spouse or anyone the Participant previously named as a Beneficiary, and the Participant may designate primary and secondary Beneficiaries. A Beneficiary designation must comply with procedures established by the Plan Administrator (as defined below) and must be received by the Plan Administrator before the Participant’s death. If the Participant dies without a valid Beneficiary designation (as determined by the Plan Administrator) and has no surviving spouse, the Beneficiary shall be the Participant’s estate.
2.2 “Disability” means that the Participant has any medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties of his or her position or any substantially similar position that can be expected to result in death or can be expected to last for a continuous period of not less than six months. Disability shall be determined by the Plan Administrator, in his or her sole discretion.
2.3 “Long-Term Performance Incentive Award” means the amount earned under the Performance Component after determining achievement of the Performance Goals and applying any adjustments.
2.4 “Long-Term Performance Incentive Grant” means the amount granted to a Participant under the Performance Component.
2.5 “Long-Term Performance Incentive Opportunity” means the award opportunity, as approved in accordance with this Plan, under the Performance Component expressed as a percentage of the Participant’s base salary.
2.6 “Long-Term Retention Incentive Grant” means the amount granted to a Participant under the Retention Component.
2.7 “Performance Cycle” means a period of three consecutive TVA fiscal years. A new Performance Cycle begins at the start of each TVA fiscal year (October 1). The following illustration shows how the three-year cycles overlap:
| | | | | | | | | | | | | | | | | |
| Plan Cycle | FY 1 | FY 2 | FY 3 | FY 4 | FY 5 |
| Cycle 1 | |
|
|
| |
| Cycle 2 |
|
|
|
| |
| Cycle 3 |
|
|
|
| |
2.8 “Performance Goals” means the long-term strategic financial and/or operational goals established for each Performance Measure used to determine awards under the Performance Component.
2.9 “Performance Measures” means the specific metrics used to measure performance under the Performance Component.
2.10 “Retention Cycle” means a period of three consecutive TVA fiscal years. A new Retention Cycle begins at the start of each TVA fiscal year and typically includes three one-year vesting periods.
2.11 “Retirement” and like phrases mean an employee has met one of the following criteria: (i) the employee has reached the age of 55 with at least 10 years of full-time TVA service, (ii) the employee has reached the age of 60 with at least five years of full-time TVA service, or (iii) the employee is in the Civil Service Retirement System or Federal Employees Retirement System and is eligible for an immediate retirement benefit upon termination as outlined in the applicable plan.
2.12 “Scorecard Achievement” means the level of performance compared to the approved Performance Measures and Performance Goals over the Performance Cycle (expressed as a percentage of performance).
2.13 “Section 409A” means Section 409A of the Internal Revenue Code and the regulations and other binding guidance thereunder.
2.14 “Separation from Service” and like phrases have the meaning set forth in 26 C.F.R. §1.409A-1(h) as such provision may be amended from time to time.
3. PARTICIPATION
The TVA Board of Directors (the “Board”) or its designee(s) (collectively, the “Authorized Parties”) shall approve individual employees as Participants. Each Participant approved for participation shall be enrolled in the Performance Component, the Retention Component, or both. Participation is generally limited to key positions that have the ability to significantly impact the long-term financial and/or operational objectives critical to TVA’s overall success (“Key Positions”).
Eligibility based on the Plan guidelines does not entitle an individual to receive an award under the Plan. An employee’s eligibility and participation in one year does not guarantee eligibility or participation for any subsequent year. No other long-term incentive may be provided to Participants that is inconsistent with the Plan.
3.1 Performance Component. Eligibility to participate in the Performance Component shall be limited to executives serving in positions within the Officer/Executive (O/E) pay band. Key Positions within M&S pay band may become eligible based on market prevalence.
3.2 Retention Component. Eligibility to participate in the Retention Component shall be limited to:
• Executives serving in positions within the O/E pay band; and
• Other key positions based on market prevalence.
Participation in the Plan, as well as the terms of each award granted under the Plan, is at the discretion of the Authorized Parties based on, among other things, recruiting needs and review of benchmark data.
4. PERFORMANCE MEASURES AND GOALS
The Board establishes both Performance Measures and Performance Goals. Performance Measures focus primarily on the achievement of TVA’s long-term financial and/or operational goals, and Performance Goals are established for each Performance Measure. Performance Measures and Goals typically cover the three-year period of the Performance Cycle. Performance Measures and Goals will generally be set within the first 90 days of the Performance Cycle. It is the intention of TVA that changes to the Performance Measures and Goals will not be made during or at the conclusion of the Performance Cycle; however, the Board retains the right to do so in its discretion. The results of the Performance Measures and Goals are approved for each Performance Cycle by the Board.
5. DETERMINATION OF GRANTS AND AWARDS
5.1 Grant Frequency.
5.1.1 Long-Term Performance Incentive Grants will typically be made annually as of the first day of each Performance Cycle. Long-Term Retention Incentive Grants will typically be granted annually as of the first day of each fiscal year. Grants must be formally approved by an Authorized Party prior to being communicated to Participants. Approval will generally be part of the compensation review. Formal communication of approved grants shall be provided to Participants as soon as practicable after approval.
5.1.2 If, after the first day of a Performance Cycle or Retention Cycle, an individual is hired and becomes eligible/approved to participate in the Performance Component or Retention Component or is promoted or transferred into a position that is covered by the Performance Component or Retention Component (or would provide for an increase in the grant amount), the employee may, unless the Plan Administrator determines otherwise, become a Participant with respect to each Performance Cycle and Retention Cycle then in effect, provided that such participation shall be on a pro-rated basis.
5.2 Calculation of Grants and Awards. Grants represent the right of a Participant to receive a cash award, subject to vesting, in the amount determined by an Authorized Party, as set forth below.
5.2.1 Performance Component. Long-Term Performance Incentive Grants are based on a Participant’s base salary and Long-Term Performance Incentive Opportunity on the grant date, and are calculated as follows:
| | | | | | | | | | | | | | |
| Long-Term Performance Incentive Grant (Target Value) | = | Base Salary at Grant Date | x | Long-Term Performance Incentive Opportunity at Grant Date |
Long-Term Performance Incentive Awards are based on achieved level of performance compared to the established Performance Measures and Goals over the Performance Cycle and are calculated as follows for all Participants other than the CEO:
| | | | | | | | | | | | | | |
| Long-Term Performance Incentive Award | = | Long-Term Performance Incentive Grant (Target Value) | x | Scorecard Achievement (0% - 200%) |
Long-Term Performance Incentive Awards for the CEO are calculated in the same manner except that the Scorecard Achievement ranges from 0% to 150% instead of 0% to 200%.
For each Participant other than the CEO, the maximum Long-Term Performance Incentive Award allowed under the Plan is 200% of the Long-Term Performance Incentive Grant unless a different maximum is approved by an Authorized Party. For the CEO, the maximum Long-Term Performance Incentive Award allowed under the Plan is 150% of the Long-Term Performance Incentive Grant unless a different maximum is approved by the Board. The Board may apply discretion, based on consideration of corporate factors and events that are significant during the Performance Cycle but not included or captured in the Performance Goals and Performance Measures, to reduce or increase the final Long-Term Performance Incentive Awards for any or all Participants as long as the final awards do not exceed the maximum amounts described above.
5.2.2 Retention Component. Long-Term Retention Incentive Awards will be fixed on the date of grant.
5.3 Vesting. A Participant will vest in his or her award as set forth below.
5.3.1 Performance Component. Except as provided in Section 5.4, Participants will become fully vested in their Long-Term Performance Incentive Awards if they remain employed through the end of the Performance Cycle. Long-Term Performance Incentive Grants will be made as of October 1 or as soon as practicable following the date that an employee becomes eligible/approved during a fiscal year or is hired, promoted, or transferred into a position that is covered by the Performance Component and will vest three years later on September 30, provided that the Participant remains employed through that date, unless a proration has occurred. For example, a Long-Term Performance Incentive Grant made for the Performance Cycle beginning on October 1, 2022, to a Participant who was enrolled in the Plan on such date, will become fully vested on September 30, 2025.
5.3.2 Retention Component. The Retention Component shall have a vesting period covering three fiscal years. Long-Term Retention Incentive Awards will be granted on October 1 or as soon as practicable following the date that an employee becomes eligible/approved during a fiscal year or is hired, promoted, or transferred into a position that is covered by the Retention Component and will become 1/3 vested on each subsequent September 30, provided the Participant remains employed through that date, unless a proration has occurred. For example, a Long-Term Retention Incentive Award of $75,000 granted on October 1, 2022, to a Participant who was enrolled in the Plan on such date, will vest as follows: $25,000 on September 30, 2023; $25,000 on September 30, 2024; and $25,000 on September 30, 2025.
5.4 Awards Payable for Termination Prior to Vesting. Except as otherwise determined by an Authorized Party or provided in the subsections below, if a Participant’s employment with TVA terminates for any reason, the unvested portion of any award shall be completely forfeited on the date of such termination of the Participant’s employment.
5.4.1 Death. If a Participant dies while employed, the Beneficiary shall be entitled to the sum of (1) any Long-Term Performance Incentive Awards that have already vested at the time of the Participant’s death and have not yet been paid to the Participant, (2) any Long-Term Performance Incentive Awards that have not vested at the time of the Participant’s death and that cover a Performance Cycle for which the Participant has received a Long-Term Performance Incentive Grant, provided that the amount of any such Long-Term Performance Incentive Award (a) will be calculated assuming that the Scorecard Achievement is 100 percent and (b) will be prorated based on the number of whole months the Participant was participating in the Plan during the applicable Performance Cycle, (3) any portion of a Long-Term Retention Incentive Award that has already vested at the time of the Participant’s death and has not yet been paid, and (4) a prorated portion of any Long-Term Retention Incentive Grant that has not vested at the time of the Participant’s death provided that the Long-Term Retention Incentive Award for each vesting period within a Retention Cycle will be prorated based on the number of whole months the Participant was employed by TVA during the vesting period in which the Participant died as compared to (a) 12 months for the vesting period that includes the day that the Participant died, (b) 24 months for the vesting period
that immediately follows the vesting period during which the Participant died, and (c) 36 months for the second vesting period that follows the vesting period during which the Participant died (such sum being hereinafter referred to as the “Beneficiary Award”). The Beneficiary Award shall be paid to the Beneficiary in accordance with Section 6.3.
5.4.2 Disability. If a Participant Separates from Service due to a Disability, the Participant shall be entitled to the sum of (1) any Long-Term Performance Incentive Awards that have already vested at the time the Participant Separates from Service due to a Disability and have not yet been paid to the Participant, (2) any Long-Term Performance Incentive Awards that have not vested at the time of the Participant’s Separation from Service due to a Disability and that cover a Performance Cycle for which the Participant has received a Long-Term Performance Incentive Grant, provided that the amount of any such Long-Term Performance Incentive Award (a) will be calculated assuming that the Scorecard Achievement is 100 percent and (b) will be prorated based on the number of whole months the Participant was employed by TVA during the applicable Performance Cycle, (3) any portion of a Long-Term Retention Incentive Award that has already vested at the time that the Participant Separates from Service due to a Disability and has not yet been paid, and (4) a prorated portion of any Long-Term Retention Incentive Grant that has not vested at the time of the Participant’s Separation from Service provided that the Long-Term Retention Incentive Award for each vesting period within a Retention Cycle will be prorated based on the number of whole months the Participant was employed by TVA during the vesting period in which the Participant Separated from Service as compared to (a) 12 months for the vesting period that includes the day that the Participant Separated from Service, (b) 24 months for the vesting period that immediately follows the vesting period during which the Participant Separated from Service, and (c) 36 months for the second vesting period that follows the vesting period during which the Participant Separated from Service (such sum being hereinafter referred to as the “Disability Award”). The Disability Award shall be paid to such Participant in accordance with Section 6.4 below.
5.4.3 Retirement. If a Participant Separates from Service due to a Retirement, the Participant shall be entitled to the sum of (1) any Long-Term Performance Incentive Grant that has already vested at
the time the Participant Separates from Service and has not yet been paid (the “Initial Performance Award”), (2) a prorated portion of any Long-Term Performance Incentive Grant that has not vested at the time of the Participant’s Separation from Service, provided that the amount of any such Long-Term Performance Incentive Award (a) is calculated using the actual Scorecard Achievement and (b) is prorated based on the number of whole months the Participant is employed by TVA during the applicable Performance Cycle (such amount being hereafter referred to as the “Prorated Performance Award”), (3) any portion of a Long-Term Retention Incentive Grant that has already vested at the time the Participant Separates from Service and has not yet been paid (the “Initial Retention Award”), and (4) a prorated portion of any Long-Term Retention Incentive Grant that has not vested at the time of the Participant’s Separation from Service provided that the amount of any such Long-Term Retention Incentive Award for each vesting period within the Retention Cycle is prorated based on the number of whole months the Participant was employed by TVA during such vesting period (such amount being hereafter referred to as the “Prorated Retention Award”). The Initial Performance Award, the Prorated Performance Award, the Initial Retention Award, and the Prorated Retention Award will be paid to such Participant in accordance with Section 6.5 below.
6. PAYMENT OF AWARDS
Each award shall be paid in cash after deducting the amount of applicable federal, state, and local withholding taxes of any kind required by law to be withheld by TVA or any amounts due to be paid to TVA. All awards will be approved by an Authorized Party prior to payment. The awards will be paid as follows:
6.1 Performance Component. Except in the case of death, Disability, or Retirement or in the case of deferral, Long-Term Performance Incentive Awards will be paid in a lump sum no later than the December 15 following the end of each Performance Cycle.
6.2 Retention Component. Except in the case of death, Disability, or Retirement, Long-Term Retention Incentive Awards will be paid in a lump sum within two months of vesting. For example, a Long-Term Retention Incentive Award of $75,000 granted on October 1, 2022, will be paid as follows to the extent the Participant remains employed as of the applicable vesting date: $25,000 within two months after September 30, 2023;
$25,000 within two months after September 30, 2024; and $25,000 within two months after September 30, 2025.
6.3 Death. The Beneficiary Award will be paid as soon as administratively practicable but in no event later than the last day of the second full calendar month following the Participant’s death.
6.4 Disability. The Disability Award will be paid as soon as administratively practicable but in no event later than the last day of the second full calendar month following the Participant’s Separation from Service due to Disability.
6.5 Retirement. The Initial Performance Award and the Prorated Performance Award will be paid in a lump sum within two months of the end of the applicable Performance Cycle; the Initial Retention Award will be paid in a lump sum within two months of vesting; and the Prorated Retention Award will be paid in a lump sum within two months of the end of the fiscal year during which the Participant Separates from Service due to Retirement.
7. DEFERRAL ELECTION OPTION
Participants are not eligible to defer the payment of Long-Term Retention Incentive Awards. If permitted by the Plan Administrator, Participants may defer the payment of Long-Term Performance Incentive Awards in accordance with the rules set forth below.
7.1 Eligibility for Deferral for Existing Participants. Participants who are eligible to participate in the Performance Component before the Performance Measures and Goals for a Performance Cycle have been established may defer Long-Term Performance Incentive Awards under the following conditions:
7.1.1 The deferral election must be made before the first day of the Performance Cycle;
7.1.2 The deferral election is irrevocable as of the date set forth in Section 7.1.1 above;
7.1.3 The deferral must be made with respect to 1 percent increments of the actual Long-Term Performance Incentive Award;
7.1.4 Before the deferral election becomes irrevocable, the Participant must elect to have deferred amounts paid out in accordance with the options set forth in TVA’s Deferred Compensation Plan; and
7.1.5 The Participant performs services at TVA continuously from the date the Performance Measures and Goals are established through the date the deferral election is made.
7.2 Eligibility for Deferral for New Participants. Participants who become eligible to participate in the Plan after the Performance Measures and Goals for a Performance Cycle have been established and who have not at any time previously been eligible to participate in the Plan or in any other plan required to be aggregated and treated with the Plan as a single plan under Section 409A may defer their Long-Term Performance Incentive Awards under the following conditions:
7.2.1 The deferral election must be made within 30 days after the date the Participant becomes eligible to participate in the Plan and will be effective with respect to participation in the Performance Cycle that began on the immediately preceding October 1;
7.2.2 The deferral election is irrevocable as of the date set forth in Section 7.2.1 above;
7.2.3 The deferral must be made with respect to 1 percent increments of the actual Long-Term Performance Incentive Award;
7.2.4 The deferral election applies only with respect to compensation paid for services to be performed after the election is made; and
7.2.5 Before the deferral election becomes irrevocable, the Participant must elect to have deferred amounts paid out in accordance with the options set forth in TVA’s Deferred Compensation Plan.
8. PLAN ADMINISTRATION
8.1 Authority of Plan Administrator. The Plan shall be administered by the CEO or the designee of the CEO (the “Plan Administrator”) unless otherwise delegated by the Board. When the CEO is a Participant, the Board or its designee shall be the Plan Administrator with respect to matters affecting the CEO. Subject to the express provisions of the Plan, the Plan Administrator shall have the power, authority, and sole and exclusive discretion to construe, interpret, and administer the Plan,
including without limitation the power and authority to make factual determinations relating to, and correct mistakes in, awards and to take such other action in the administration and operation of the Plan as the Plan Administrator deems appropriate under the circumstances, including but not limited to the following:
8.1.1 The Plan Administrator may, from time to time, prescribe forms and procedures for carrying out the purposes and provisions of the Plan;
8.1.2 The Plan Administrator shall have the authority to prescribe the terms of any communications made under the Plan and to interpret and construe the Plan, any rules and regulations under the Plan, and the terms and conditions of any award, and answer all questions arising under the Plan, including questions on the proper construction and interpretation of the Plan;
8.1.3 The Plan Administrator may (1) notify each Participant that he or she has been selected as a Participant and (2) obtain from each Participant such agreements and powers and designations of Beneficiaries as the Plan Administrator shall reasonably deem necessary for the administration of the Plan; and
8.1.4 To the extent permitted by law, the Plan Administrator may at any time delegate such powers and duties to one or more other executives or managers, whether ministerial or discretionary, as the Plan Administrator may deem appropriate, including but not limited to authorizing the Plan Administrator’s delegate to execute documents on the Plan Administrator’s behalf.
8.2 Determinations by Plan Administrator. All decisions, determinations, and interpretations by the Plan Administrator regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of or operation of any Plan award shall be final and binding on all Participants, Beneficiaries, heirs, assigns, or other persons holding or claiming rights under the Plan or any award.
9. AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Plan without the consent of any Participant, Beneficiary, or other person; provided that, no amendment or termination of the Plan may adversely affect, other than as specified in the Plan, any right acquired by any Participant or any Beneficiary under an award vested before the effective date of such amendment or termination. Upon termination of the Plan, distribution of vested awards shall be made to Participants and Beneficiaries in the manner and at the time described in Sections 6 and 7, unless an Authorized Party determines in his or her sole discretion that all such amounts shall be distributed upon termination of the Plan, in accordance with Section 409A to the extent applicable. TVA and the Plan Administrator, after such amendment or termination, shall continue to have full administrative powers to take any and all action contemplated by the Plan which is necessary or desirable and to make payment of any outstanding awards earned by Participants in accordance with the terms of the Plan.
10. GENERAL PROVISIONS
10.1 Board Delegations. Approvals regarding awards granted under the Plan for each Participant, and the amount of actual awards, will be made in accordance with delegations approved by the Board.
10.2 Non-Transferability of Rights and Interests. Neither a Participant nor a Beneficiary may alienate, assign, transfer, or otherwise encumber his or her rights and interests under the Plan, nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person, and any attempt to do so shall be null and void.
10.3 Source of Payments. All awards shall be payable out of TVA’s general assets. Each Participant’s or Beneficiary’s claim, if any, for the payment of an award shall not be superior to that of any general and unsecured creditor of TVA. Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust of any kind or a fiduciary relationship between TVA and any Participant, Beneficiary, or other person. If an error or omission is discovered in any of the determinations, the Plan Administrator, in his or her sole discretion, shall cause an appropriate equitable adjustment to be made in order to remedy such error or omission.
10.4 Severability. In the event that any provision or portion of the Plan shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of the Plan shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
10.5 Limitation of Rights. Nothing in the Plan shall be construed to give any employee any right to be selected as a Participant or to receive an award or to be granted an award other than as is provided in this document. Nothing in the Plan or any grant or award issued pursuant to the Plan shall be construed to limit in any way the right of TVA to terminate a Participant’s employment at any time, without regard to the effect of such termination on any rights such Participant would otherwise have under the Plan, or give any right to a Participant to remain employed by TVA in any particular position or capacity or at any particular rate of remuneration. During the lifetime of the Participant, only the Participant (or the Participant’s legal representative) may exercise the rights and receive the benefits of any award.
10.6 Titles. The titles of the articles and sections herein are included for convenience of reference only and shall not be construed as part of the Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine. Words such as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.
10.7 Governing Law. TVA is a corporate agency and instrumentality of the United States, and the Plan shall be governed by and construed under federal law. In the event federal law does not provide a rule of decision for any matter or issue under the Plan, the law of the State of Tennessee shall apply, without taking into account conflict of law principles. By participating in the Plan, each Participant agrees that the jurisdiction for any action with respect to the Plan shall lie in the United States District Court for the Eastern District of Tennessee. Any such action must commence no later than the date an award is paid or was to be paid, as applicable.
10.8 Authorized Representatives. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized representative of TVA.
10.9 Compliance with Section 409A. At all times, to the extent Section 409A applies to amounts deferred under the Plan, (a) the Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by an Authorized Party, the Plan Administrator, and the Participants or their Beneficiaries shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in the Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in the Plan that is not expressly set forth shall be deemed to be set forth herein, and the Plan shall be administered in all respects as if such provision were expressly set forth herein.
Except for the payment of the Prorated Performance Award and the Prorated Retention Award, the payment of awards under the Performance Component (to the extent no deferral election is made) and the Retention Component are intended to be interpreted, operated, and administered in a manner consistent with the short-term deferral exemption from Section 409A. TVA may at any time amend the Plan with respect to Section 409A but is not required to do so. No provision of the Plan is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid hereunder, and TVA shall not, under any circumstances, have any liability to a Participant or Beneficiary for any taxes, penalties, or interest due on amounts paid or payable under the Plan, including taxes, penalties, or interest imposed under Section 409A.
10.10 Tax Withholding. TVA is authorized to withhold from any award taxes due or potentially payable in connection with any transactions involving the Plan, and to take any other actions TVA may deem advisable to allow TVA to satisfy obligations for the payment of withholding taxes and other tax obligations related to any award.
Exhibit 10.4
EXECUTIVE SEVERANCE PLAN
Amended and Restated as of May 9, 2024
Prepared by: /s/ Rebecca Tolene 5-9-24
Rebecca Tolene, VP & Chief of Staff Date
Validation Date: 05/09/2024
Review Frequency: 3 years
Validated By: Stephen Gaby
TABLE OF CONTENTS
Page
1. PURPOSE AND SCOPE.................................................................................................... 4
1.1 Establishment.................................................................................................... 4
1.2 Purpose............................................................................................................. 4
2. DEFINITIONS..................................................................................................................... 4
2.1 “Beneficiary”....................................................................................................... 4
2.2 “Code”............................................................................................................... 4
2.3 “EAIP”................................................................................................................ 4
2.4 “Eligible Employee”........................................................................................... 4
2.5 “Good Reason”.................................................................................................. 4
2.6 “Gross Misconduct”............................................................................................ 5
2.7 “Level I Employee”............................................................................................. 6
2.8 “Level II Employee”........................................................................................... 6
2.9 “LTIP”................................................................................................................ 6
2.10 “Participant”....................................................................................................... 6
2.11 “Plan”................................................................................................................. 6
2.12 “Section 409A”................................................................................................…6
2.13 “Separation from Service”.................................................................................. 6
2.14 “Severance Multiple”......................................................................................... 6
2.15 “Target EAIP”..................................................................................................... 6
2.16 “Termination Date”............................................................................................. 6
3. ELIGIBILITY AND PARTICIPATION.................................................................................... 7
3.1 Eligibility............................................................................................................. 7
3.2 Participation....................................................................................................... 7
4. PLAN BENEFITS................................................................................................................ 7
4.1 Severance.......................................................................................................... 7
4.2 Nonqualified Deferred Compensation Plans..................................................... 7
4.3 Supplemental Executive Retirement Plan......................................................... 8
4.4 No Duplication of Severance Benefits............................................................... 8
5. PAYMENT OF SEVERANCE BENEFITS............................................................................ 8
5.1 In General.......................................................................................................... 8
5.2 Benefits............................................................................................................. 8
Page
6. PLAN ADMINISTRATION................................................................................................... 9
6.1 Authority of Plan Administrator......................................................................... 10
6.2 Determinations by Plan Administrator.............................................................. 10
7. GENERAL PROVISIONS................................................................................................... 10
7.1 Amendment or Termination of the Plan............................................................ 10
7.2 Source of Payments.......................................................................................... 11
7.3 Severability........................................................................................................ 11
7.4 Limitation of Rights........................................................................................... 11
7.5 Titles................................................................................................................. 11
7.6 Governing Law.................................................................................................. 11
7.7 Claims and Appeals Procedures...................................................................... 12
7.8 Authorized Representatives............................................................................. 13
7.9 Compliance with Section 409A......................................................................... 14
7.10 Rehired Employees.......................................................................................... 15
7.11 Incapacity.......................................................................................................... 15
7.12 Golden Parachute............................................................................................ 15
7.13 Successors....................................................................................................... 17
7.14 Tax Withholding................................................................................................ 17
EXHIBIT A.............................................................................................................................. 18
EXHIBIT B.............................................................................................................................. 19
1.PURPOSE AND SCOPE
1.1 Establishment. The Tennessee Valley Authority (“TVA” or the “Company”) hereby amends and restates in its entirety this Executive Severance Plan (“Plan”). The Plan supports TVA’s compensation philosophy, which is designed to attract, retain, and engage employees needed to accomplish TVA’s broad mission.
1.2 Purpose. The purpose of the Plan is to provide a competitive severance payment (“Severance Payment”) to certain eligible employees in the event of a TVA-initiated separation for reasons other than Gross Misconduct, death, or disability or in the event an employee terminates his or her employment with TVA for Good Reason as defined below.
2.DEFINITIONS
Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:
2.1“Beneficiary” means a beneficiary designated in writing by a Participant to receive any payments to be made under the Plan to such Participant, and if no beneficiary is designated by the Participant, then the Participant’s estate shall be deemed to be the Participant’s designated beneficiary.
2.2“Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.3“EAIP” means TVA’s Executive Annual Incentive Plan, as amended from time to time.
2.4“Eligible Employee” means any executive designated as a Level I Employee or Level II Employee, in each case as determined by the Plan Administrator from time to time, and each other person specifically designated as an Eligible Employee on the exhibits hereto.
2.5“Good Reason” means the occurrence of any of the following:
(a)a material adverse change in the Participant’s authority, duties, or responsibilities (excluding during any period of Participant’s physical or mental incapacity) with respect to his or her employment with the Company without the Participant’s prior written consent;
(b)a material reduction in the Participant’s base salary without the Participant’s prior written consent (other than any reduction applicable to management employees generally);
(c)an actual change in the Participant’s principal work location by more than 50 miles and more than 50 miles from the Participant’s principal place of abode as of the date of such change in job location without the Participant’s prior written consent; or
(d)a material breach by the Company of any term or provision of the Plan without the Participant’s prior written consent.
A Participant may be considered to have such “Good Reason” to terminate employment for purposes of the Plan only if the Participant provides written notice to the Company of termination within 30 days of the occurrence of the applicable foregoing event(s) above or, if later, within 30 days of the date the Participant has knowledge that such event(s) occurred.
An event constituting Good Reason shall no longer constitute Good Reason if the circumstances described in the Good Reason notice are cured by the Company within 30 days following receipt of the Good Reason notice. If the Company does not cure the circumstances giving rise to the Good Reason event described in the Good Reason notice within thirty (30) days after receipt of the Good Reason notice, the Participant who provided the Good Reason notice may resign for Good Reason by terminating employment within thirty (30) days following the end of the Company’s thirty (30) day cure period.
2.6“Gross Misconduct” means:
(a)misconduct involving dishonesty, fraud, or gross negligence that directly results in significant economic or reputational harm to TVA;
(b)insubordination, intentional neglect of duties, or refusal to cooperate with investigations of TVA’s business practices;
(c)conviction of a crime amounting to a felony under the laws of the United States or any of the several states, or a crime of moral turpitude;
(d)a significant violation of TVA’s Code of Ethics or Code of Conduct; or
(e)disclosure without authorization of proprietary or confidential information of TVA.
The Plan Administrator shall determine in his, her, or its sole discretion whether the conduct of an employee constitutes Gross Misconduct.
2.7“Level I Employee” means an executive serving as a Vice President or above, excluding the CEO and Level II Employees.
2.8“Level II Employee” means an Executive Vice President of the Company from time to time.
2.9“LTIP” means TVA’s Long-Term Incentive Plan, as amended from time to time.
2.10“Participant” means any Eligible Employee whom the Plan Administrator designates as a Participant from time to time.
2.11“Plan” means this Executive Severance Plan as amended from time to time.
2.12“Section 409A” means Section 409A of the Code and the regulations and other binding guidance thereunder.
2.13“Separation from Service” and like phrases have the meaning set forth in 26 C.F.R. §1.409A-1(h) as such provision may be amended from time to time.
2.14“Severance Multiple” means, with respect to each Participant, the applicable Severance Multiple as set forth on the applicable exhibit hereto.
2.15“Target EAIP” means the EAIP Award that a Participant would receive under the EAIP with respect to the year in which the Termination Date occurs assuming (1) a Scorecard Achievement of 100%, (2) a Corporate Multiplier of 1.0, and (3) an Individual Performance Multiplier of 100%. Capitalized terms used in this definition and not otherwise defined herein shall have the meanings assigned to such terms in the EAIP.
2.16“Termination Date” means the date a Participant’s employment with TVA is terminated.
3.ELIGIBILITY AND PARTICIPATION
3.1Eligibility. Eligibility to participate in the Plan shall be limited to employees who meet the following criteria:
3.1.1Position and Designation. The Participant is an Eligible Employee as defined in this Plan. The Board, in its sole discretion, may determine whether an individual employee who otherwise meets the criteria for being an Eligible Employee should be excluded from participation in the Plan and in such case the Plan Administrator shall notify such employee of the Board’s determination.
3.1.2Execution of Release. The Participant must execute a separation agreement and general release, which will include certain covenants such as confidentiality, non-compete, non-solicitation, non-disparagement, and cooperation, in form and substance reasonably satisfactory to TVA (the “Release”), that will be provided to the Participant prior to the effective date of the Participant’s Separation from Service (the “Termination Date”) or as soon as practicable following the Termination Date. A Participant may have up to 21 days (or such longer period as determined by the Plan Administrator) to consider the agreement before signing and may sign it at any time during such period. If the Participant signs the Release, he or she may cancel it within seven days. Any such cancellation must be in writing and signed by the Participant by close of business on the seventh calendar day after he or she signs
the Release. If the Participant does not cancel the agreement, the agreement will become effective on the eighth calendar day after the date of signature. If the Participant cancels the agreement, it will become null and void and TVA will not implement any of its terms.
3.2Participation. A Participant may be eligible to receive Severance Payments following a Separation from Service due to (a) a termination of services by TVA (other than due to the Participant’s Gross Misconduct or as a result of the death or disability of the Participant); or (b) a resignation by the Participant due to Good Reason.
4.PLAN BENEFITS
4.1Severance. A Participant who Separates from Service in accordance with Section 3.2 will be entitled to the benefits described in Section 5, subject to the terms and conditions of payment otherwise set forth herein.
4.2Nonqualified Deferred Compensation Plans. Each Participant shall be entitled to payment of his or her vested benefit, if any, under any
nonqualified deferred compensation plan of TVA (including, but not limited to, the Deferred Compensation Plan) in accordance with the terms of such plan. For the avoidance of doubt, TVA is not modifying the terms of the Deferred Compensation Plan or any rights of Participants under such plan.
4.3Supplemental Executive Retirement Plan. Each Participant shall be entitled to payment of his or her vested benefit, if any, under TVA’s Supplemental Executive Retirement Plan (“SERP”) in accordance with the terms of such plan.
4.4No Duplication of Severance Benefits. The Plan is intended to replace any and all provisions providing for severance payments within each existing offer letter, employment agreement, and severance agreement between the Company and any Participant who receives Severance Payments. Accordingly, notwithstanding anything to the contrary in this Plan, a Participant who receives Severance Payments under the Plan will not be entitled to receive severance benefits under any other plan or agreement of the Company.
5.PAYMENT OF SEVERANCE BENEFITS
5.1In General. Subject to the effectiveness of the Release and except as otherwise expressly set forth below, Severance Payments will be paid as a lump-sum payment as soon as practicable after (and in no event later
than sixty (60) days following) a Participant’s Separation from Service. This amount shall be paid in cash after deducting the amount of applicable federal, state, and local withholding taxes of any kind required by law to be withheld by TVA. In the event that the Participant dies before receiving a Severance Payment, the Severance Payment shall be paid to the Participant’s Beneficiary. All amounts will be approved by the Plan Administrator prior to payment.
5.2Benefits. Each Participant who experiences a Separation from Service and otherwise meets the terms and conditions of the Plan shall be entitled to the following Severance Payments, in each case as determined by the Plan Administrator in good faith:
5.2.1Cash Separation Payment. For all Participants other than the CEO, severance equal to the product of (a) the applicable Severance Multiple times (b) sum of the Participant’s
(i) annual base salary and (ii) Target EAIP with respect to the year in which the Termination Date occurs, with clauses (i) and (ii) measured in the aggregate as of the highest of, as applicable, (x) the Participant’s Termination Date or (y) the event(s) constituting Good Reason, and for the CEO, severance equal to the product of the applicable Severance Multiple times the CEO’s annual base
salary with respect to the year in which the Termination Date occurs, with the annual base salary measured as of the highest of, as applicable, (x) the Participant’s Termination Date or (y) the event(s) constituting Good Reason.
5.2.2Continued Healthcare Benefits. Continued coverage for healthcare benefits following the Participant’s Separation from Service (at active employee rates with respect to the coverage levels in effect immediately prior to such Separation from Service) until the earlier of (a) the end of that number of months correlating with the applicable Severance Multiple times 12, or (b) the date upon which the Participant and/or the Participant’s eligible dependents become covered under similar plans (the “Continued Healthcare Benefits”). The Continued Healthcare Benefits will be made consistent with the applicable benefit plan(s) of the Company; provided, however, that in the Plan Administrator’s sole discretion, the Continued Healthcare Benefits may be administered through reimbursement in lieu of direct coverage, subject to the Company’s normal expense reimbursement policy, and will in either case be taxable to the extent required to avoid adverse consequences to Participant or the Company.
5.2.3Unpaid Prior Year Incentive Awards. A lump sum cash payment equal to any EAIP award and/or LTIP award that has already vested at the time the Participant Separates from Service but has not yet been paid. For the avoidance of doubt, this payment is in lieu of any payments to which the Participant is entitled under the EAIP and/or the LTIP with respect to such EAIP and/or LTIP award.
5.2.4In-Progress Annual Incentive Awards. A lump sum cash payment equal to any EAIP award the performance cycle of which is in progress on the Termination Date, which shall be prorated and calculated based on actual achievement of the applicable performance goals and paid when such awards are paid to similarly situated employees of the Company. For the avoidance of doubt, this payment shall be in lieu of any payment to which the Participant is entitled under the EAIP with respect to such EAIP award.
5.2.5In-Progress Long-Term Incentive Award. If the Participant is eligible for Retirement (as defined in the LTIP), the Participant’s rights shall be unaffected and the Participant shall remain eligible for the benefits, if any, available to the Participant under the LTIP upon Separation from Service due to a Retirement.
6.PLAN ADMINISTRATION
6.1Authority of Plan Administrator. The Plan shall be administered by the Chief Executive Officer (“CEO”) or designee (the “Plan Administrator”) unless otherwise delegated by the Board. When the CEO is a Participant, the Board or its designee shall be the Plan Administrator with respect to matters affecting the CEO. Subject to the express provisions of the Plan, the Plan Administrator shall have the power, authority, and sole and exclusive discretion to construe, interpret, and administer the Plan, including without limitation the power and authority to make factual determinations relating to, and correct mistakes in, payments and to take such other action in the administration and operation of the Plan as the Plan Administrator deems appropriate under the circumstances, including but not limited to the following:
6.1.1The Plan Administrator may, from time to time, prescribe forms and procedures for carrying out the purposes and provisions of the Plan;
6.1.2The Plan Administrator shall have the authority to prescribe the terms of any communications made under the Plan and to interpret and construe the Plan, any rules and regulations under the Plan, and the terms and conditions of any payment, and answer all questions arising under the Plan, including questions on the proper construction and interpretation of the Plan; and
6.1.3To the extent permitted by law, the Plan Administrator may at any time delegate such powers and duties to one or more other executives or managers, whether ministerial or discretionary, as the Plan Administrator may deem appropriate, including but not limited to authorizing the Plan Administrator’s delegate to execute documents on the Plan Administrator’s behalf.
6.2Determinations by Plan Administrator. All decisions, determinations, and interpretations by the Plan Administrator regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of or operation of any Severance Payment shall be final and binding on all Participants.
7.GENERAL PROVISIONS
7.1Amendment or Termination of the Plan. Subject to compliance with the requirements of Section 409A, the Board may amend or terminate the Plan at any time; provided, however, that the Board may amend or terminate the Plan only after obtaining the consent of any adversely affected Participant who has, prior thereto, experienced a Separation from Service.
7.2Source of Payments. All Severance Payments shall be payable out of TVA’s general assets. Each Participant’s claim, if any, for payment shall not be superior to that of any general and unsecured creditor of TVA. Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust of any kind or a fiduciary relationship between TVA and any Participant, Beneficiary, or other person. If an error or omission is discovered in any of the determinations, the Plan Administrator, in his, her, or its sole discretion, shall cause an appropriate equitable adjustment to be made in order to remedy such error or omission.
7.3Severability. In the event that any provision or portion of the Plan shall be determined to be invalid or unenforceable for any reason, the
remaining provisions and portions of the Plan shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
7.4Limitation of Rights. Nothing in the Plan shall be construed to give any employee any right to be selected as a Participant or to receive a Severance Payment or to be granted a Severance Payment other than as is provided in this document. Nothing in the Plan or any grant or payment issued pursuant to the Plan shall be construed to limit in any way the right of TVA to terminate a Participant’s employment at any time, without regard to the effect of such termination on any rights such Participant would otherwise have under the Plan, or give any right to a Participant to remain employed by TVA in any particular position or capacity or at any particular rate of remuneration. During the lifetime of the Participant, only the Participant (or the Participant’s legal representative) may exercise the rights and receive the benefits of any payment.
7.5Titles. The titles of the articles and sections herein are included for convenience of reference only and shall not be construed as part of the Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine. Words such as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.
7.6Governing Law. TVA is a corporate agency and instrumentality of the United States, and the Plan shall be governed by and construed under federal law. In the event federal law does not provide a rule of decision for any matter or issue under the Plan, the law of the State of Tennessee shall apply, without taking into account conflict of law principles. By participating in the Plan, each Participant agrees that the jurisdiction for
any action with respect to the Plan shall lie in the United States District Court for the Eastern District of Tennessee.
7.7Claims and Appeals Procedures.
7.7.1Claims Procedure. Any Participant who feels he or she is entitled to Severance Payments must file a written claim with the Plan Administrator within 90 days following his or her Termination Date, on such applications or forms, if any, required by the Plan Administrator, for the claim to be valid. An initial determination shall be made by the Plan Administrator or such other persons as designated from time to time by the Board. Without limiting the foregoing, a request for Severance Payments will be considered a claim, and it will be subject to a full and fair review.
7.7.2Denials. If a claim is wholly or partially denied, the Plan Administrator will provide the Participant with a written or electronic notification of the denial. This written or electronic notification will ordinarily be provided to the Participant no later than 90 days after the receipt of a claim by the Plan Administrator, unless the Plan Administrator determines that special circumstances require an extension of time for processing a claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension will be furnished to the Participant within the initial determination period or as soon as practicable thereafter. The Plan Administrator’s notification of a denial will generally provide the following information: (a) the reason or reasons for the denial; (b) an explanation of the basis on which the determination was made; (c) a description of any additional material or information necessary for a Participant to perfect the claim on appeal; and (d) information as to the steps to be taken if a Participant wants to appeal the denial of a claim.
7.7.3Appeals Procedures. Upon the denial of a claim, a Participant may file an appeal, in writing, with the Plan Administrator in such form as may be designated by the Plan Administrator as follows:
(a) a Participant must file an appeal no later than 60 days after the Participant has received written notification of the denial of the claim; (b) the Participant may submit written comments, documents, records, and other information relating to the appeal;
(c) the Participant may review all pertinent documents relating to the denial of the claim and submit any issues and comments, in writing, to the Plan Administrator; (d) the Participant will be provided, upon request, with reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (e) the appeal will be given a full and fair review. This review
will take into account comments, documents, records, and other information submitted by the Participant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
7.7.4Notifications. If the claim is approved on appeal, the Plan Administrator will notify the Participant accordingly. If the appeal is denied, the Plan Administrator will provide a notification that generally sets forth the following: (a) the specific reason or reasons for the denial; (b) an explanation of the basis on which the determination was made; and (c) a statement that the Participant is entitled to receive, upon request, reasonable access to, and copies of, all documents, records, and other information relevant to the claim. The Plan Administrator will ordinarily provide the Participant with written or electronic notification of the determination on appeal within 60 days after the receipt of the Participant’s notice of appeal, unless the Plan Administrator determines that special circumstances require an extension of time for processing the claim. If the Plan Administrator determines that an extension of time for processing is required, written notice of the extension will be furnished to the Participant prior to the termination of the initial 60- day period or as soon as practicable thereafter.
7.7.5Further Review. A Participant is required to utilize and exhaust the claims and appeal procedures set forth in these procedures before filing a lawsuit. The scope of review by a court is limited to the administrative record developed as part of the claims and appeal procedures, and such review is further limited as to whether the determination by the Plan Administrator was arbitrary and capricious. Any lawsuit must be filed by the Participant no later than 30 calendar days from the date that the Plan Administrator sends written or electronic notification as required under Section 7.7.4.
7.7.6Improper Payments. In the event that TVA approves a claim for Severance Payments, but later determines that a Participant engaged in Gross Misconduct, the Participant shall be required to return all Severance Payments received prior to TVA’s determination, and the Participant will no longer be entitled to receive any Severance Payments. TVA may enforce its rights under this Section by bringing a lawsuit in the venue specified in Section 7.6 at any time.
7.8Authorized Representatives. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized representative of TVA.
7.9Compliance with Section 409A. At all times, to the extent necessary to prevent the imposition of taxes and penalties under Section 409A,
(a) the Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by an authorized representative of
TVA and the Participants or their Beneficiaries shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in the Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in the Plan that is not expressly set forth shall be deemed to be set forth herein, and the Plan shall be administered in all respects as if such provision were expressly set forth herein. TVA may at any time amend the Plan to cure any defect with respect to Section 409A but is not required to do so. No provision of the Plan is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid hereunder, and TVA shall not, under any circumstances, have any liability to a Participant or Beneficiary for any taxes, penalties, or interest due on amounts paid or payable under the Plan, including taxes, penalties, or interest imposed under Section 409A. To the extent necessary to prevent the imposition of taxes and penalties under Section 409A, to the extent payments under the Plan could, due to the timing of a Release, be paid in either of two calendar years, such payments shall be paid in the later such calendar year.
For purposes of this Plan, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” as defined under Section 409A. For purposes of applying the rules under Section 409A, each separately identifiable payment under this Plan shall be treated as a “separate payment,” within the meaning of Section 409A, and the right to a series of installment payments under this Plan is to be treated as a right to a series of “separate payments” under Section 409A. Notwithstanding anything to the contrary in the Plan, if TVA determines (a) that on the date the Participant’s employment with TVA terminates, the Participant is a “specified employee” (within the meaning of Section 409A) of TVA and (b) that any payments to be provided to the Participant pursuant to the Plan are or may become subject to the additional tax under Section 409A(a)(1)(B) or any other taxes or penalties imposed under Section 409A if provided at the time otherwise that would be required under the Plan, then such payments shall be delayed until the date that is six months after the date of the Participant’s “separation from service” (as such term is defined under Section 409A) with TVA, or, if earlier, the date of the Participant’s death. Any such delayed payments instead shall be made in a lump sum on the first day of the seventh month
following the Participant’s “separation from service” (as such term is defined under Section 409A), or, if earlier, the date of the Participant’s death. To the extent that any expenses, reimbursement, fringe benefit, or other, similar plan or arrangement provides for a “deferral of compensation” within the meaning of Section 409A, then such amount shall be reimbursed in accordance with Section 409A, including (a) the
amount eligible for reimbursement or payment under such plan or arrangement in one calendar year may not affect the amount eligible for reimbursement or payment in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid), (b) subject to any shorter time periods provided herein or in the applicable plans or arrangements, any reimbursement or payment of an expense under such plan or arrangement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (c) the right to any reimbursement or in-kind benefit is not subject to liquidation or exchange for another benefit.
7.10Rehired Employees. Participants who experience a Separation from Service shall have no right to be re-employed by the Company. Each Participant’s right to receive or retain Severance Payments is conditioned upon such Participant not seeking or accepting re-employment from the Company without the written consent of the Plan Administrator. To the extent any Participant accepts re-employment with the Company in violation of this Section 7.10, the Company shall not be obligated to pay, and shall be entitled to the prompt repayment of, Severance Payments with respect to such Participant.
7.11Incapacity. If a Participant or a Beneficiary experiences a mental incapacity or disability or is unable to care for his or her affairs because he or she is a minor, any payment or benefit due the Participant or Beneficiary may be paid or provided to the Participant’s spouse or to any other person deemed by the Plan Administrator to have incurred expense for such Participant (including a duly appointed guardian, committee, or other legal representative), and any such payment or provision of benefits shall be a complete discharge of the Company’s obligation hereunder.
7.12Golden Parachute.
7.12.1Anything in this Plan to the contrary notwithstanding, if any payment or benefit a Participant would receive from the Company or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced Amount”
shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate),
results in such Participant’s receipt, on an after-tax basis, of the greater amount of the Payment. Any reduction made pursuant to this Section 7.12.1 shall be made in accordance with the following order of priority: (i) Full Credit Payments (as defined below) that are payable in cash, (ii) non-cash Full Credit Payments that are taxable, (iii) non-cash Full Credit Payments that are not taxable, (iv) Partial Credit Payments (as defined below), and (v) non-cash employee welfare benefits. In each case, reductions shall be made in reverse chronological order such that the payment or benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first payment or benefit to be reduced (with reductions made pro-rata in the event payments or benefits are owed at the same time). “Full Credit Payment” means a payment, distribution, or benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, that if reduced in value by one dollar reduces the amount of the parachute payment (as defined in Section 280G of the Code) by one dollar, determined as if such payment, distribution, or benefit had been paid or distributed on the date of the event triggering the excise tax. “Partial Credit Payment” means any payment, distribution, or benefit that is not a Full Credit Payment.
7.12.2A nationally recognized certified public accounting firm selected by the Company (the “Accounting Firm”) shall perform the foregoing calculations related to the Excise Tax. If a reduction is required pursuant to Section 7.12.1, the Accounting Firm shall administer the ordering of the reduction as set forth in Section 7.12.1. The Company shall bear all expenses with respect to the determinations by such Accounting Firm required to be made hereunder.
7.12.3The Accounting Firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to each affected Participant and the Company within fifteen (15) calendar days after the date on which each such Participant’s right to a Payment is triggered. Any good faith determinations of the Accounting Firm made hereunder shall be final, binding, and conclusive upon such Participant and the Company.
7.13Successors. The Company shall assign its obligations under this Plan to any successor thereto, and any failure of the Company to obtain a satisfactory agreement from such successor to assume and agree to perform the obligations under this Plan shall constitute a material breach by the Company of this Plan.
7.14Tax Withholding. TVA is authorized to withhold from any Severance Payment taxes due or potentially payable in connection with any transactions involving the Plan, and to take any other actions TVA may deem advisable to allow TVA to satisfy obligations for the payment of withholding taxes and other tax obligations related to any Severance Payment.
Exhibit A
Benefits for Participants Other than the CEO
This Exhibit A describes the payments offered to Participants in the Executive Severance Plan (the “Plan”) other than the CEO upon a termination or resignation of employment with the Tennessee Valley Authority (the “Company”) as described in the Plan. Capitalized but undefined terms in this Exhibit A shall have the meanings set forth in the Plan.
The following description is intended only as a summary and is qualified in its entirety by reference to the full text of the Plan. In the event of any conflict between this summary and the Plan, the Plan shall control.
| | | | | | | | | | | | | | |
| Level I | Level II |
| Severance Multiple | 0.5 | 1.0 |
Cash Separation Payment | Lump Sum: Severance Multiple * (Annual Salary + Target EAIP) |
| Healthcare Benefits | Continuation for up to Severance Multiple * 12 months |
In-Progress EAIP | Prorated Actual | Prorated Actual |
In-Progress LTIP | Forfeited | Forfeited |
Exhibit B
Benefits for the CEO
This Exhibit B describes the payments offered to the Chief Executive Officer (“CEO”) in the Executive Severance Plan (the “Plan”) upon a termination or resignation of employment with the Tennessee Valley Authority (the “Company”) as described in the Plan. Capitalized but undefined terms in this Exhibit B shall have the meanings set forth in the Plan.
If the CEO (who, for the avoidance of doubt, is an Eligible Employee and a Participant) experiences a Separation from Service and otherwise meets the terms and conditions of the Plan, he or she shall be entitled to the following Severance Payments in accordance with the principles of Section 5 as if specifically set forth therein, in each case as determined by the Plan Administrator in good faith:
| | | | | |
| Severance Multiple | 1.0 |
Cash Separation Payment | Lump Sum: Severance Multiple * Annual Salary |
| Healthcare Benefits | Continuation for up to Severance Multiple * 12 months |
In-Progress EAIP | Prorated Actual |
In-Progress LTIP | Forfeited |
Exhibit 10.5
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Amended and Restated as of May 9, 2024
Prepared by: /s/ Rebecca Tolene 5-9-24
Rebecca Tolene, VP & Chief of Staff Date
Validation Date: 05/09/2024
Review Frequency: 3 years
Validated By: Stephen Gaby
TABLE OF CONTENTS
Page
1. PURPOSE AND SCOPE..................................................................................................... 1
1.1 Establishment.................................................................................................... 1
1.2 Purpose............................................................................................................. 1
2. DEFINITIONS...................................................................................................................... 1
2.1 “Accrued Benefit”............................................................................................... 1
2.2 “Actuarial Equivalent”......................................................................................... 1
2.3 “Approved Termination”...................................................................................... 1
2.4 “Average Compensation”................................................................................... 1
2.5 “Beneficiary”....................................................................................................... 1
2.6 “Board”............................................................................................................... 2
2.7 “Compensation”..................................................................................................2
2.8 “Credited Service”.............................................................................................. 2
2.9 “Date of Benefit Commencement”..................................................................... 2
2.10 “Normal Retirement Date”.................................................................................. 2
2.11 “Nonelective Contributions”............................................................................... 2
2.12 “Participants”...................................................................................................... 2
2.13 “Plan Administrator”........................................................................................... 2
2.14 “Plan Year”......................................................................................................... 2
2.15 “Prior Employer Offset”...................................................................................... 2
2.16 “Qualified Plan”.................................................................................................. 2
2.17 “Qualified Plan Offset”....................................................................................... 3
2.18 “Retirement Committee”..................................................................................... 3
2.19 “Section 409A”................................................................................................... 3
2.20 “Separation from Service”.................................................................................. 3
2.21 “Social Security Offset”...................................................................................... 3
2.22 “Unapproved Termination”................................................................................. 4
3. PARTICIPATION.................................................................................................................. 4
3.1 Tier One............................................................................................................. 4
3.2 Tier Two............................................................................................................. 4
4. BENEFIT ELIGIBILITY AND CALCULATION...................................................................... 4
4.1 Vesting............................................................................................................... 4
4.2 Calculation of Accrued Benefit........................................................................... 4
4.3 Benefit Payable for Approved Termination......................................................... 4
4.4 Benefit Payable for Death Prior to Date of Benefit Commencement................. 5
4.5 Benefit Payable for Unapproved Termination.................................................... 5
4.6 Benefit Payable for Change in Role................................................................... 5
5. PAYMENT OF BENEFITS................................................................................................... 6
5.1 Terms and Conditions of Benefit Payments....................................................... 6
5.2 Death................................................................................................................. 6
5.3 Alienation of Benefits Prohibited........................................................................ 6
5.4 Incapacity........................................................................................................... 7
6. GENERAL PROVISIONS.................................................................................................... 7
6.1 Funding.............................................................................................................. 7
6.2 Right to Amend, Suspend, or Terminate............................................................ 7
6.3 Right to Benefit.................................................................................................. 7
6.4 Administration of the Plan.................................................................................. 8
6.5 Titles.................................................................................................................. 8
6.6 Governing Law.................................................................................................. 8
6.7 Separability........................................................................................................ 8
6.8 Authorized Officers............................................................................................ 8
6.9 Certain Rights and Limitations........................................................................... 8
6.10 Compliance with Section 409A.......................................................................... 9
1.PURPOSE AND SCOPE
1.1Establishment. The Tennessee Valley Authority (“TVA”) hereby amends and restates in its entirety its Supplemental Executive Retirement Plan (“Plan”). This Plan supports TVA’s compensation philosophy, which is designed to attract, retain, and engage employees needed to accomplish TVA’s broad mission.
1.2Purpose. The purpose of the Plan is to provide retirement benefits to selected employees of TVA which are comparable to those provided by competing organizations.
2.DEFINITIONS
Wherever used herein, the following terms have the meaning set forth below, unless a different meaning is clearly required by the context:
2.1“Accrued Benefit” means an annual benefit commencing at the later of (a) the Normal Retirement Date or (b) the Participant’s age at the time of Separation from Service, and continuing during the expected lifetime of the Participant based on the applicable mortality table used by the TVA Retirement System.
2.2“Actuarial Equivalent” means a benefit of equal value to a benefit otherwise payable in a different form or at a different time under the Plan, when computed on the basis of the mortality and interest rate that are used by the TVA Retirement System as in effect on the date distribution is made.
2.3“Approved Termination” means termination of employment with TVA due to (a) retirement on or after the Participant's Normal Retirement Date, (b) retirement on or after attainment of actual age 55, if such retirement has the approval of the Board or its designee, (c) death in service as an employee, (d) disability (as such term is defined under the Rules and Regulations of the TVA Retirement System) as determined by the Plan Administrator, or (e) any other circumstances approved by the Board or its designee.
2.4“Average Compensation” means the highest average of Compensation during three consecutive Plan Years. If a Participant has been an employee of TVA for less than three Plan Years, the average shall be determined based on the period of employment.
2.5“Beneficiary” shall mean the person or persons, designated in writing by a Participant, who are to receive a benefit under this Plan in the event of a Participant’s death. In the absence of any designated beneficiary or
in the event that the designated beneficiary is deceased, then the beneficiary shall be the Participant’s estate.
2.6“Board” means the Board of Directors of TVA.
2.7“Compensation” means the sum of annual salary, unreduced by contributions under Sections 125, 132, and 402(a)(8) of the Internal Revenue Code, plus annual incentive award.
2.8“Credited Service” means actual service with TVA plus any additional service which the Board, or its designee, approves under this Plan.
2.9“Date of Benefit Commencement” means the date benefit payments begin upon the later of (a) the date the Participant turns age 55, or (b) the date of the Participant’s Separation from Service.
2.10“Normal Retirement Date” shall mean the first of the month coincident with or next following the date on which the Participant has attained age 62.
2.11“Nonelective Contributions” shall have the same definition as found in Section 2.31 of the Provisions of the Tennessee Valley Authority Savings and Deferral Retirement Plan.
2.12“Participants” shall mean those employees participating in the Plan as provided in Section 3.
2.13“Plan Administrator” means, unless otherwise designated by the Board, the Chief Executive Officer (“CEO”) or the designee of the CEO. When the CEO is a Participant, the Board or its designee shall be the Plan Administrator with respect to matters affecting the CEO.
2.14“Plan Year” is TVA's fiscal year, October 1 to September 30.
2.15“Prior Employer Offset” means the Actuarial Equivalent of the benefit earned under a prior employers’ qualified defined benefit pension plan or plans attributable to prior employer service, which is included in Credited Service under this Plan, assuming benefit payments are to begin at the Normal Retirement Date. A Prior Employer Offset shall apply only if all or a portion of the period of service during which such benefit was earned is included in Credited Service. The Board or its designee may, in its sole discretion, waive all or part of the Prior Employer Offset for any Participant.
2.16“Qualified Plan” means the retirement plan under which a Participant accrues benefits for his or her TVA service and may be any of the TVA
Retirement System, the Civil Service Retirement System, or the Federal Employees Retirement System.
2.17“Qualified Plan Offset” means, in the absence of separate authorized TVA documentation defining the Qualified Plan offset, the Actuarial Equivalent of the Participant’s benefit, calculated as follows, and assuming the maximum benefit with no survivor elections and benefit payments beginning at the Normal Retirement Date:
2.17.1 For an employee who first becomes a participant in the TVA Retirement System, Civil Service Retirement System, or Federal Employees Retirement System before July 1, 2014, the product of (a) the Participant’s average compensation (as defined under the Rules and Regulations of the TVA Retirement System), times (b) Credited Service (not to exceed 24 years), times (c) 1.3 percent.
2.17.2 For an employee who first becomes a participant in the TVA Retirement System, Civil Service Retirement System, or Federal Employees Retirement System on or after July 1, 2014, the Participant’s Hypothetical Deferral Plan Account. Hypothetical Deferral Plan Account shall mean the sum of: (a) Nonelective Contributions, and (b) hypothetical interest on Nonelective Contributions at the rate of 6% per year, applied at the end of each Plan Year. This hypothetical interest of 6% per year will in no way be affected by the actual investment return experienced by the Participant with respect to his or her Nonelective Contributions.
2.18 “Retirement Committee” means a group of three persons appointed by the Board or its designee to manage any trust established to fund benefits under the Plan.
2.19 “Section 409A” means Section 409A of the Internal Revenue Code and the regulations and other binding guidance thereunder.
2.20 “Separation from Service” and like phrase shall have the same meaning as the term “separation from service” as defined in 26 CFR §1.409A-1(h) of the regulations under Section 409A.
2.21 “Social Security Offset” means the primary benefit amount, commencing at the Participant’s Normal Retirement Date, that would be calculated under the Social Security Act as in effect at the time of the Participant’s Separation from Service. In the event of an Unapproved Termination, the calculation shall be made assuming that the Participant continued to earn covered compensation until the Participant’s Normal Retirement Date at a rate equal to the maximum taxable wage base. In the event of an Approved Termination, the calculation shall be made assuming no further compensation is earned. The Board or its designee may, in its sole discretion, waive all or part of the Social Security Offset for any Participant.
2.22 “Unapproved Termination” means a termination of employment with TVA that does not constitute an Approved Termination as such term is defined in Section 2.3.
3.PARTICIPATION
The Board, or its designee, shall select individual employees as Participants. Each Participant so selected shall be designated as a Tier One or a Tier Two Participant.
3.1Tier One. Eligibility to participate in Tier One shall be limited to include the Chief Executive Officer and his or her direct reports at the Executive Vice President or Senior Vice President levels.
3.2Tier Two. Eligibility to participate in Tier Two shall be limited to include positions at the Senior Vice President level who are in managerial roles or individual employees designated as participants by the Board or its designee.
4.BENEFIT ELIGIBILITY AND CALCULATION
4.1Vesting. A Participant will vest in his or her Accrued Benefit (a) after five (5) years of actual TVA service, unless otherwise waived by the Board or its designee, (b) upon death in service as an employee, or (c) upon disability (as such term is defined under the Rules and Regulations of the TVA Retirement System) as determined by the Plan Administrator.
4.2Calculation of Accrued Benefit. A Participant’s Accrued Benefit is calculated at the time of the Participant’s Separation from Service as set forth below:
4.2.1Tier One Participants. The Accrued Benefit for Tier One Participants shall be equal to (a) the lesser of (i) 2.5 percent of Average Compensation times years of Credited Service and (ii) 60 percent of Average Compensation, minus (b) the sum of the Qualified Plan Offset, the Prior Employer Offset, and the Social Security Offset.
4.2.2Tier Two Participants. The Accrued Benefit for Tier Two Participants shall be equal to (a) 1.3 percent, times (b) years of Credited Service, times (c) the difference of (i) Average Compensation minus (ii) earnable compensation as defined in the Qualified Plan.
4.3Benefit Payable for Approved Termination. In the event of an Approved Termination, the Participant shall be eligible to receive a benefit equal to the Accrued Benefit subject to the reduction below. In the event
the Participant separates from service prior to the Normal Retirement Date, the Accrued Benefit shall be reduced by 5/12 percent for each month that the Date of Benefit Commencement precedes the Normal Retirement Date; however, in no event shall the benefit be reduced by more than 35 percent.
4.4Benefit Payable for Death Prior to Date of Benefit Commencement. In the event of a Participant’s death prior to the Date of Benefit Commencement, the Participant’s Beneficiary shall receive a lump-sum benefit that is the Actuarial Equivalent of the Accrued Benefit that would have been payable had the Participant separated from service on the date of death and elected a joint and 50 percent survivor benefit.
4.5Benefit Payable for Unapproved Termination. In the event of an Unapproved Termination, the Participant shall receive a benefit equal to the Accrued Benefit subject to the reductions below.
4.5.1Separation from Service with Less than Ten Years of Credited Service. In the event the Participant has less than ten (10) years of Credited Service at the time of Separation from Service, the Accrued Benefit shall be reduced by ten (10) percent for each full year of Credited Service less than ten (10) years.
4.5.2Separation from Service Prior to Normal Retirement Date. In the event the Participant separates from service prior to the Normal Retirement Date, the Accrued Benefit, as reduced in Section 4.5.1 above, shall be further reduced by 10/12 percent for each month that the Date of Benefit Commencement precedes the Normal Retirement Date; however, in no event shall the Accrued Benefit, as reduced in Section 4.5.1 above, be reduced further by more than 70 percent.
4.6Benefit Payable for Change in Role. In the event a Participant’s eligibility under the Plan changes due to a change in role, the Participant shall receive a benefit as explained below.
4.6.1Tier One Participants. In the event the Participant no longer meets eligibility requirements to be included in Tier One, benefits will be frozen and credited service for Tier One benefits will end effective the date of the change in role. If the new role is eligible for Tier Two, the Participant will begin accruing Tier Two benefits effective the date of the change in role. If the new role is not eligible for Tier Two, benefits will be frozen effective the date of the change in role, and no further benefits will accrue under the Plan.
4.6.2Tier Two Participants. In the event a Tier Two participant becomes a Tier One participant, all SERP benefits will be paid as Tier One for the participant’s total credited service. If a new role is not eligible for Tier One or Tier Two, benefits will be frozen effective the date of the change in role, and no further benefits will accrue under the Plan.
5.PAYMENT OF BENEFITS
5.1Terms and Conditions of Benefit Payments. The benefit calculated under Section 4 above will be paid as follows:
5.1.1Participants Prior to January 1, 2009. For Participants in the Plan prior to January 1, 2009, the benefit calculated under Section 4 will be paid in the Actuarial Equivalent form of five (5) annual installments, unless a Participant has validly elected pursuant to IRS transition rules prior to January 1, 2009, to receive payments in the Actuarial Equivalent form of ten (10) annual installments.
5.1.2Participants on or After January 1, 2009. For Participants first in the Plan on or after January 1, 2009, the benefit calculated under Section 4 will be paid in the Actuarial Equivalent form of five (5) annual installments, unless a Participant has validly elected under IRS rules within thirty (30) days of becoming a participant in the Plan to receive payments in the Actuarial Equivalent form of ten (10) annual installments.
5.1.3Payment of Annual Installments. The first annual installment pursuant to Sections 5.1.1 and 5.1.2 above will be paid on the Date of Benefit Commencement, and subsequent annual installments will be paid in January of each succeeding year.
5.2Death. In the event the Participant dies following the Date of Benefit Commencement but prior to the final annual installment, the remaining unpaid benefit due the Participant will be paid to the Participant’s Beneficiary following the Participant’s death in a lump sum calculated to be the Actuarial Equivalent of the remaining unpaid benefit due the Participant.
5.3Alienation of Benefits Prohibited. No benefit payable at any time under the Plan shall be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, attachment, or encumbrance of any kind, except as required by law. No benefit payable at any time under the Plan shall be subject in any manner to the debts or liabilities of any person entitled to such benefit, and TVA shall not be required to make any payments toward such debts or liabilities.
5.4Incapacity. In the event that any benefit hereunder is, or becomes, payable to a minor, to a person under a legal disability, or to a person not judicially declared incompetent but who by reason of illness or mental or physical disability is, in the opinion of the Plan Administrator, incapable of personally receiving and giving valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Plan Administrator may provide for such payment or any part thereof to be made to any person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for such person and shall constitute a complete discharge of the liability of TVA therefor.
6.GENERAL PROVISIONS
6.1Funding. The Plan is intended as an unfunded plan of supplementary retirement benefits for selected employees of TVA. TVA may establish appropriate reserves for the Plan on its books of account in accordance with generally accepted accounting principles. TVA may set up a trust or trusts to manage these reserves, and the Retirement Committee will be responsible for administration and management of any such trust or trusts. Such reserves shall be, for all purposes, part of the general assets of TVA, and no Participant, Beneficiary, or other person claiming a right under the Plan shall have any interest, right, or title to such reserves except as provided by the terms of any trust established to hold such reserves. In all events, it is the intent of TVA that the Plan be treated as unfunded for tax purposes.
6.2Right to Amend, Suspend, or Terminate. TVA reserves the right at any time and from time to time to amend or terminate the Plan by action of the Board or its designee without the consent of any Participant, Beneficiary, or other person. However, no such amendment may decrease a Participant’s Accrued Benefit as of the time of such amendment. In the event of Plan termination, a Participant shall be entitled to receive his or her Accrued Benefit, determined as of the date of Plan termination, in the form and manner as set forth in the Plan as of the date of Plan termination.
6.3Right to Benefit. No person shall have any right to a benefit under the Plan except as such benefit has become payable in accordance with the terms of the Plan, and such right shall be no greater than the rights of any unsecured general creditor of TVA. Notwithstanding any other provision of this Plan, if an employee shall be discharged for reasons of acts of fraud, dishonesty, larceny, misappropriation, or embezzlement committed against TVA, all of such employee’s rights to benefits under this Plan shall be forfeited.
6.4Administration of the Plan. Except as otherwise specifically provided in the Plan, the Plan Administrator shall be the administrator of the Plan. The Plan Administrator shall have full authority in its discretion to determine all questions arising in connection with the Plan, including the interpretation of the Plan, and may adopt procedural rules and may rely on such legal counsel, actuaries, accountants, and agents as it may deem advisable to assist in the administration of the Plan. The Plan Administrator may establish such rules and procedures as it deems appropriate to carry out the intent and purpose of the Plan. Decisions of the Plan Administrator shall be conclusive and binding on all Participants and Beneficiaries. The Plan Administrator may delegate in writing to one or more persons any of its duties as Plan Administrator and may revoke in writing any such designation previously made.
6.5Titles. The cover page of this Plan, the Table of Contents, and the titles of the articles and sections herein are included for convenience of reference only and shall not be construed as part of this Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine; such words as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.
6.6Governing Law. TVA is a corporate agency and instrumentality of the United States, and this Plan shall be governed by and construed under federal law. In the event federal law does not provide a rule of decision for any matter or issue under the Plan, the law of the State of Tennessee shall apply; provided, however, in no event shall Tennessee’s choice of law provisions apply.
6.7Separability. If any term or provision of this Plan as presently in effect or amended from time to time, or the application thereof to any payments or circumstances, shall to any extent be invalid or unenforceable, the remainder of the Plan, and the application of such term or provision to payments or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term or provision of the Plan shall be valid and enforced to the fullest extent permitted by law.
6.8Authorized Officers. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized officer of TVA.
6.9Certain Rights and Limitations. The establishment of the Plan shall not be construed as conferring any legal rights upon any employee or other person for a continuation of employment, nor shall it interfere with the
rights of TVA to discharge any employee and to treat any employee without regard to the effect that such treatment might have upon that employee as a participant in the Plan.
6.10Compliance with Section 409A. At all times, to the extent Section 409A applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board or its designee, the Plan Administrator, the Retirement Committee, and the Participants or their Beneficiaries shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein. No provision of the Plan is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid hereunder, and TVA shall not, under any circumstances, have any liability to a Participant or Beneficiary for any taxes, penalties, or interest due on amounts paid or payable under the Plan, including taxes, penalties, or interest imposed under Section 409A.
Exhibit 10.6
RESTORATION PLAN
Amended and Restated as of May 9, 2024
Prepared by: /s/ Rebecca Tolene 5-9-24
Rebecca Tolene, VP & Chief of Staff Date
Validation Date: 05/09/2024
Review Frequency: 3 years
Validated By: Stephen Gaby
TABLE OF CONTENTS
Page
1. PURPOSE........................................................................................................................... 1
1.1 Establishment.................................................................................................... 1
1.2 Purpose.............................................................................................................. 1
2. DEFINITIONS...................................................................................................................... 1
2.1 “Account”............................................................................................................ 1
2.2 “Actual Service”.................................................................................................. 1
2.3 “Annual Compensation”..................................................................................... 1
2.4 “Annual Contribution Amount”............................................................................ 1
2.5 “Annual Incentive”.............................................................................................. 1
2.6 “Base Pay”......................................................................................................... 1
2.7 “Beneficiary”....................................................................................................... 1
2.8 “Board”............................................................................................................... 2
2.9 “Code”................................................................................................................ 2
2.10 “Deferral Election”.............................................................................................. 2
2.11 “Disabled”........................................................................................................... 2
2.12 “Discretionary Contributions”............................................................................. 2
2.13 “Effective Date”.................................................................................................. 2
2.14 “Eligible Employee”............................................................................................ 2
2.15 “Hypothetical Annual Compensation Deferral Contributions”............................ 2
2.16 “Investment Committee”..................................................................................... 2
2.17 “Investment Funds”............................................................................................ 3
2.18 “Investment Return”........................................................................................... 3
2.19 “Participant”....................................................................................................... 3
2.20 “Participant Contributions”................................................................................. 3
2.21 “Plan”................................................................................................................. 3
2.22 “Plan Administrator”........................................................................................... 3
2.23 “Plan Year”......................................................................................................... 3
2.24 “Restoration Contributions”................................................................................ 3
2.25 “Savings Plan”................................................................................................... 3
2.26 “Section 409A”................................................................................................... 3
2.27 “Separation 5-Year Source”............................................................................... 3
2.28 “Separation 10-Year Source”............................................................................. 3
2.29 “Separation from Service”.................................................................................. 3
2.30 “Separation Lump Sum Source”........................................................................ 4
2.31 “Set Date 5-Year Source”................................................................................... 4
2.32 “Set Date 10-Year Source”................................................................................. 4
2.33 “Set Date Lump Sum Source”............................................................................ 4
2.34 “Source”............................................................................................................. 4
2.35 “TVARS”............................................................................................................. 4
2.36 “TVARS Rules and Regulations”........................................................................ 4
2.37 “Unforeseeable Emergency”.............................................................................. 4
Page
3. ELIGIBILITY TO PARTICIPATE........................................................................................... 4
4. PLAN GUIDELINES............................................................................................................. 4
4.1 Participant Contributions.................................................................................... 4
4.2 Rules Regarding Participant Contributions........................................................ 5
4.3 Restoration Contributions.................................................................................. 6
4.4 Discretionary Contributions................................................................................ 6
5. PARTICIPANT DIRECTION OF ACCOUNT BALANCES.................................................... 6
5.1 Selection of Investment Funds........................................................................... 6
5.2 Participant Direction of Deemed Investments.................................................... 7
6. VESTING............................................................................................................................. 8
6.1 Participant Contributions.................................................................................... 8
6.2 Restoration Contributions.................................................................................. 8
6.3 Discretionary Contributions................................................................................ 8
6.4 Prior Service...................................................................................................... 8
6.5 Forfeiture............................................................................................................ 8
7. PAYMENT OF DEFERRED COMPENSATION................................................................... 8
7.1 Separation from Service.................................................................................... 9
7.2 Set Payment Date............................................................................................. 9
7.3 Death................................................................................................................ 10
7.4 Subsequent Elections....................................................................................... 10
7.5 Unforeseeable Emergency............................................................................... 11
7.6 Account Liquidation.......................................................................................... 12
7.7 Acceleration of Payments................................................................................. 12
8. PLAN ADMINISTRATION................................................................................................... 12
8.1 Plan Administrator............................................................................................. 12
8.2 Determinations by Plan Administrator............................................................... 13
9. AMENDMENT OR TERMINATION OF THE PLAN............................................................ 13
10. GENERAL PROVISIONS................................................................................................. 14
10.1 Non-Transferability of Rights and Interests....................................................... 14
10.2 Compliance with Section 409A......................................................................... 14
10.3 Severability........................................................................................................ 14
10.4 Limitation of Rights........................................................................................... 15
10.5 Titles................................................................................................................. 15
Page
10.6 Governing Law.................................................................................................. 15
10.7 Authorized Representatives.............................................................................. 15
10.8 Certain Rights and Limitations.......................................................................... 15
10.9 Tax Withholding................................................................................................. 15
10.10 No Trust Is Created........................................................................................... 15
1. PURPOSE
1.1Establishment. The Tennessee Valley Authority (“TVA”) hereby establishes the Restoration Plan (the “Plan”), effective October 1, 2022. The Plan supports TVA’s compensation philosophy, which is designed to attract, retain, and engage employees needed to accomplish TVA’s broad mission.
1.2 Purpose. The primary purposes of the Plan are to provide (a) an opportunity for certain Eligible Employees to defer Base Pay, and (b) for the restoration of retirement contributions that cannot be made under the tax-qualified Savings Plan maintained by TVA due to Code limitations applicable to the Savings Plan and/or the definition of compensation used in the Savings Plan.
2. DEFINITIONS
Wherever used herein, the following terms have the meaning set forth below, unless a different meaning is clearly required by the context:
2.1 “Account” means the account established on TVA’s books in the name of each Participant to which Base Pay deferred by the Participant as Participant Contributions pursuant to Sections 4.1 and 4.2, or Restoration Credits or Discretionary Contributions awarded to the Participant by TVA pursuant to Section 4.3 or 4.4, as applicable, as well as any Investment Return on such amounts, are accounted for in the form of credits.
2.2 “Actual Service” means all service as a TVA employee.
2.3 “Annual Compensation” means the sum of a Participant’s Base Pay and Annual Incentive for any one Plan Year.
2.4 “Annual Contribution Amount” means the sum of the Participant Contributions, Restoration Contributions, and Discretionary Contributions, if any, for any one Plan Year.
2.5 “Annual Incentive” means the amount awarded to a Participant under the Executive Annual Incentive Plan, as amended from time to time.
2.6 “Base Pay” means a Participant’s regular salary or wages, provided, however, that Base Pay shall also include compensation which is not currently includable in the Participant’s gross income by reason of the application of Sections 125, 132(f)(4), or 402(g)(3) of the Code and differential wage payments under Section 3401(h) of the Code.
2.7 “Beneficiary” means, collectively, such persons and/or entities as the Participant designates to be the Participant’s beneficiary or beneficiaries under this Plan. The Participant may make, change, or revoke a Beneficiary designation at any time before his or her death without the consent of the Participant’s spouse or anyone the Participant previously named as a
Beneficiary, and the Participant may designate primary and secondary Beneficiaries. A Beneficiary designation must comply with procedures established by the Plan Administrator (as defined below) and must be received by the Plan Administrator before the Participant’s death. If the Participant dies without a valid Beneficiary designation (as determined by the Plan Administrator), then such Participant’s Beneficiary shall mean (a) the widow or widower of the Participant; (b) if there is no widow or widower, the child or children of the Participant and descendants of deceased children by representation; (c) if none of the above, then the duly appointed legal representative of the estate of the Participant; and (d) if none of the above, then the person or entity so entitled under the law of the state of domicile of the Participant at the time of death.
2.8 “Board” means the Board of Directors of TVA.
2.9 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder.
2.10 “Deferral Election” means an election made by a Participant to defer, under Sections 4.1 and 4.2, a portion of his or her Base Pay as a Participant Contribution. Deferral Elections shall be made at the time(s) and form(s) prescribed by the Plan Administrator.
2.11 “Disabled” means when a Participant is determined to be disabled under TVA’s long-term disability insurance plan.
2.12 “Discretionary Contributions” means the amounts, if any, which TVA may credit to a Participant’s Account under Section 4.4.
2.13 “Effective Date” means the effective date of this Plan, which is October 1, 2022.
2.14 “Eligible Employee” means officers and key managers of TVA serving in jobs within the Officer/Executive pay band except (a) a participant in the Amended and Restated Supplemental Executive Retirement Plan of the Tennessee Valley Authority, as it may be amended from time to time; (b) a member of the Civil Service Retirement System or the Federal Employees’ Retirement System; and (c) an employee accruing a benefit under the Original Benefit Structure of TVARS, as set forth in Section 6 of the TVARS Rules and Regulations.
2.15 “Hypothetical Annual Compensation Deferral Contributions” means the product of a Participant’s Annual Compensation multiplied by the Participant’s deferral election percentage (not to exceed 6%) for the Savings Plan, in effect on the first day of the Plan Year.
2.16 “Investment Committee” means the Investment Committee of TVA.
2.17 “Investment Funds” means the funds that may be selected by the Investment Committee for the investment of a Participant’s Account, as described in Section 5.1.
2.18 “Investment Return” means the amounts credited (as income, gains, or appreciation on the deemed investments provided under Section 5) or charged (as losses or depreciation on the deemed investments provided under Section 5) to the balances in the Participant’s Account(s).
2.19 “Participant” means an Eligible Employee whom the Plan Administrator has designated as a Participant in this Plan. An individual shall remain a Participant until the earlier of the Participant’s death or the date as of which the Participant’s entire Account shall have been distributed or forfeited.
2.20 “Participant Contributions” means the amounts that a Participant elects to defer pursuant to a Deferral Election under Sections 4.1 and 4.2.
2.21 “Plan” means this Tennessee Valley Authority Restoration Plan, as set forth in this document and as amended from time to time.
2.22 “Plan Administrator” means, unless otherwise designated by the Board, the Chief Executive Officer (“CEO”) or the designee of the CEO. When the CEO is a Participant, the Board or its designee shall be the Plan Administrator with respect to matters affecting the CEO.
2.23 “Plan Year” means the TVA’s fiscal year.
2.24 “Restoration Contributions” means the amounts that TVA credits to a Participant’s Account under Section 4.3.
2.25 “Savings Plan” means the Tennessee Valley Authority Savings and Deferral Retirement Plan, as it may be amended from time to time.
2.26 “Section 409A” means Section 409A of the Code and the regulations and other binding guidance thereunder.
2.27 “Separation 5-Year Source” means a deferred compensation Source that is paid in five (5) annual installments in connection with a Participant’s Separation from Service pursuant to Section 7.1.
2.28 “Separation 10-Year Source” means a deferred compensation Source that is paid in ten (10) annual installments in connection with a Participant’s Separation from Service pursuant to Section 7.1.
2.29 “Separation from Service” and like phrases have the meaning set forth in Section 1.409A-1(h) of the Treasury Regulations as in effect from time to time.
2.30 “Separation Lump Sum Source” means a deferred compensation Source that is paid in lump sum in connection with a Participant’s Separation from Service pursuant to Section 7.1.
2.31 “Set Date 5-Year Source” means a deferred compensation Source that is paid in five (5) annual installments in connection with the occurrence of a set date pursuant to Section 7.2.
2.32 “Set Date 10-Year Source” means a deferred compensation Source that is paid in ten (10) annual installments in connection with the occurrence of a set date pursuant to Section 7.2.
2.33 “Set Date Lump Sum Source” means a deferred compensation Source that is paid in lump sum in connection with the occurrence of a set date pursuant to Section 7.2.
2.34 “Source” means a division within each Participant’s Account to which deferred compensation credits are assigned based on the time and form of payment for such deferred compensation.
2.35 “TVARS” means the TVA Retirement System, as it may be amended from time to time.
2.36 “TVARS Rules and Regulations” means the Rules and Regulations of the TVA Retirement System, as amended from time to time.
2.37 “Unforeseeable Emergency” has the meaning ascribed thereto in Section 1.409A-3(i)(3) of the Treasury Regulations.
3. ELIGIBILITY TO PARTICIPATE
An Eligible Employee shall be a Participant in this Plan when designated as such by the Plan Administrator; provided that the CEO of TVA shall be a Participant in this Plan only if and to the extent his or her participation is approved by the Board. If, during a Plan Year, a Participant has a Separation from Service, Participant Contributions shall cease as of the date of such Separation from Service, provided that an individual shall remain a Participant for other Plan purposes until the complete distribution or forfeiture of the Participant’s Account.
4. PLAN GUIDELINES
4.1 Participant Contributions. For each calendar year, a Participant may make a Deferral Election of Base Pay as follows:
4.1.1 Base Pay Election. A Participant may elect to contribute any whole percentage of Base Pay for the calendar year, up to 80%.
4.1.2 Coordination with Savings Plan. A Participant’s Deferral Election shall only apply to Base Pay that cannot be contributed to the
Savings Plan as a pretax elective deferral for the calendar year due to the application of one or more Code limitations on the Participant’s ability to make pretax elective deferrals to the Savings Plan.
4.2 Rules Regarding Participant Contributions. Each Deferral Election made by a Participant shall be subject to the following rules and conditions:
4.2.1 Timing. A Participant’s Deferral Election for a calendar year must be made and submitted to the Plan Administrator no later than the deadline prescribed by the Plan Administrator (which deadline may be no later than December 31 preceding the calendar year to which the Deferral Election relates).
4.2.2 Affirmative Deferral Election Required. If a Participant fails to submit a Deferral Election when he or she is eligible to do so, such Participant shall be deemed to have elected not to make a Deferral Election of Base Pay for the related calendar year.
4.2.3 Irrevocable. Each Participant’s Deferral Election for a calendar year shall be irrevocable and shall remain in effect for all of the Participant’s Base Pay subject to such Deferral Election. Notwithstanding the foregoing, a Participant’s Participant Contributions to the Plan shall cease upon the occurrence of any of the following events:
(a)The Participant incurs an Unforeseeable Emergency or receives an Unforeseeable Emergency distribution from this Plan, in which case such Participant’s Deferral Election for the calendar year in which such Unforeseeable Emergency occurs shall be cancelled for the remainder of the such calendar year and, in the Plan Administrator’s discretion, for the next following calendar year; or
(b)The Participant’s Separation from Service.
4.2.4 First Year of Eligibility. In the first year in which a Participant becomes eligible to make a Deferral Election to the Plan, the Participant may make a Deferral Election within thirty (30) days after the Participant first becomes eligible to make a Deferral Election. Subject to Section 4.1.2, such Deferral Election shall relate to Base Pay paid for services to be performed after the Deferral Election is made.
4.2.5 Time and Form of Payment Election. Each Participant who makes a Deferral Election also shall make, at the same time, an
election as to the time and form of payment of his or her Participant Contributions for the Plan Year, as described in Section 7. Any such election as to the form (but not the time) of payment for Participant Contributions also shall apply to any Restoration Contributions and Discretionary Contributions made on behalf of the Participant for the same Plan Year, unless the Plan Administrator determines otherwise. Restoration Contributions and Discretionary Contributions shall only be payable upon the Participant’s Separation from Service as described in Section 7.1, subject to the remaining provisions of Section 7 (but excluding Section 7.2).
4.3 Restoration Contributions.
4.3.1 Amount. Each Account will be credited with Restoration Contributions, to the extent applicable, for the relevant period of employment. Restoration Contributions shall equal the sum of
(a) and (b), offset by (c):
(a)An employer matching contribution equal to seventy-five percent (75%) of the Participant’s Hypothetical Annual Compensation Deferral Contributions for the Plan Year;
(b)An employer nonelective contribution equal to four and one-half percent (4.5%) of the Participant’s Annual Compensation for the Plan Year; and
(c)An amount equal to the sum of (i) the actual employer matching contributions and employer nonelective contributions made by TVA with respect to the Participant under the Savings Plan for the Plan Year, and (ii) the pay base credits made with respect to the Participant under Section 7 of the TVARS Rules and Regulations for the Plan Year.
4.3.2 Timing of Restoration Contributions. Restoration Contribution amounts will be credited to all Participants under this Plan at or within a reasonable period after the end of each Plan Year.
4.4 Discretionary Contributions. TVA may, in its sole discretion, at any time make an extraordinary contribution to the Account of any Participant.
5. PARTICIPANT DIRECTION OF ACCOUNT BALANCES
5.1 Selection of Investment Funds. From time to time, the Investment Committee shall select Investment Funds for purposes of determining the Investment Return on amounts deemed invested in accordance with the terms of the Plan. The Plan Administrator will notify Participants upon
becoming Participants and at such other times as the Plan Administrator deems necessary or desirable of the Investment Funds available under the Plan. The Investment Committee may change, add, or remove Investment Funds on a prospective basis at any time and in any manner it deems appropriate, and shall also have the power to direct that any separate Investment Fund be consolidated with (or “mapped” to) any other Investment Fund. In the discretion of the Investment Committee, the Investment Funds available under the Plan for Participant direction may be mirrored by actual investments maintained under a rabbi trust, if any. The Investment Committee in its sole discretion shall from time to time determine the Investment Funds available under the Plan together with such investment rules and restrictions regarding Participants’ deemed investments therein.
5.2 Participant Direction of Deemed Investments. To the extent permitted by the Plan Administrator, each Participant generally may direct the manner in which his or her Account shall be deemed invested in and among the Investment Funds, provided, such investment directions shall be made in accordance with the following rules:
5.2.1 Nature of Participant Direction. The selection of Investment Funds by a Participant shall be for the sole purpose of determining the Investment Return to be credited to his or her Account and shall not be treated or interpreted in any manner whatsoever as a requirement or direction to actually invest assets in any Investment Fund or any other investment media.
5.2.2 Investment of Contributions. An initial investment election of a Participant shall be made as of the date the Participant commences participation in the Plan and shall apply to all Annual Contribution Amounts, if any, credited to such Participant’s Account after such date. Such Participant may make subsequent investment elections each business day or on such other frequency as may be permitted by the Plan Administrator.
5.2.3 Investment of Existing Account Balances. Subject to such rules as the Plan Administrator may, in its sole discretion, from to time prescribe, each Participant may make an investment election prescribing a different percentage of his or her existing Account that will be deemed invested in each Investment Fund. Such Participant may make subsequent investment elections each business day or on such other frequency as may be permitted by the Plan Administrator.
5.2.4 Plan Administrator Discretion. The Plan Administrator shall have complete discretion to adopt and revise procedures to be followed in making such investment elections. Such procedures may include, but are not limited to, the process of making elections, the
permitted frequency of making elections, the incremental size of elections, the deadline for making elections, and the effective date of such elections. The Plan Administrator may also proscribe different requirements for different Investment Funds.
6. VESTING
6.1 Participant Contributions. A Participant shall at all times be fully vested in the portion of his or her Account attributable to Participant Contributions.
6.2 Restoration Contributions. The portion of a Participant’s Account attributable to Restoration Contributions shall vest upon the Participant’s completion of three (3) years of Actual Service. Notwithstanding the foregoing, if a Participant who is not otherwise vested dies or becomes Disabled prior to his or her Separation from Service, such Participant shall be vested in the portion of his or her Account attributable to Restoration Contributions.
6.3 Discretionary Contributions. In the event that TVA elects to make a Discretionary Contribution to a Participant’s Account, the portion of the Participant’s Account attributable to Discretionary Contributions shall vest upon the Participant’s completion of three (3) years of Actual Service, provided that TVA may provide for a different vesting schedule for a Discretionary Contribution at the time TVA makes such Discretionary Contribution. Notwithstanding the foregoing, if a Participant who is not otherwise vested dies or becomes Disabled prior to his or her Separation from Service, such Participant shall be vested in the portion of his or her Account attributable to Discretionary Contributions.
6.4 Prior Service. For the avoidance of doubt, a Participant’s service prior to the Effective Date will be considered for purposes of determining whether the Participant satisfies the vesting requirements set forth in Sections 6.2 and 6.3.
6.5 Forfeiture. If a Participant incurs a Separation from Service before the Participant is 100% vested in his or her Account, such unvested portion of the Account shall be immediately forfeited.
7. PAYMENT OF DEFERRED COMPENSATION
The total amount credited to each Participant’s Account shall be paid by TVA to the Participant pursuant to Section 7.1 in connection with the Participant’s Separation from Service, pursuant to Section 7.2 upon the specific date selected, pursuant to Section 7.3 upon the Participant’s death, pursuant to Section 7.4 as subsequently elected, or pursuant to Section 7.5 in the event of an Unforeseeable Emergency, in each case as applicable. To the extent necessary to prevent the imposition of taxes or penalties under Section 409A, each election
and payment under the Plan shall be made at a time and in a manner that complies with Section 409A.
7.1 Separation from Service. With respect to amounts elected or designated to be paid in connection with a Participant’s Separation from Service, a Participant must elect (unless, in accordance with Section 4.2.5, the Plan Administrator determines otherwise) payments in the form of lump sum, five (5) annual installments, or ten (10) annual installments, which shall respectively be paid from the Participant’s Separation Lump Sum Source, Separation 5-Year Source, and Separation 10-Year Source.
7.1.1 The balance in the Separation Lump Sum Source shall be paid in a lump sum to the Participant no later than the last day of the first full calendar month following the date of the Participant’s Separation from Service (or, if applicable, the later payment date elected in Section 7.1.3).
7.1.2 The balances in the Separation 5-Year Source and Separation 10-Year Source shall be paid in the following manner:
(a)Not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service (or, if applicable, the later payment commencement date elected in Section 7.1.3), the Participant shall be paid a sum equal to the balance in the Participant’s Separation 5-Year Source or Separation 10-Year Source, as applicable, divided by the applicable number of annual installments.
(b)Subsequent annual installments shall be paid in January of each year following the initial payment in this Section 7.1.2. The amount of each installment shall be determined by dividing the balance in the applicable Source by the number of payments remaining to be made.
7.1.3 Participants shall be permitted to elect a payment date or payment commencement date, as applicable, that is in January following the date of Separation from Service plus a period of whole years not to exceed ten (10) years (example: 5 years from the January following the date of Separation from Service), in which case the payment date or payment commencement date, as applicable, in Sections 7.1.1 or 7.1.2, respectively, shall be adjusted.
7.2 Set Payment Date. With respect to amounts elected or designated to be paid in connection with the occurrence of a set date (example: January 1, 2025), a Participant must elect (unless, in accordance with Section 4.2.5, the Plan Administrator determines otherwise) (a) a set payment date or payment commencement date, as applicable, that is (1) in January, and (2) no more than five (5) years following such election date, and (b) payments
in the form of lump sum, five (5) annual installments, or ten (10) annual installments, which shall respectively be paid from the Participant’s Set Date Lump Sum Source, Set Date 5-Year Source, and Set Date 10-Year Source.
7.2.1 The balance in the Set Date Lump Sum Source shall be paid in a lump sum to the Participant no later than the last day of January in the year elected for payment.
7.2.2 The balances in the Set Date 5-Year Source and Set Date 10-Year Source shall be paid in the following manner:
(a)No later than the last day of January starting in the year elected for payment commencement, the Participant shall be paid a sum equal to the balance in the Participant’s Set Date 5-Year Source or Set Date 10-Year Source, as applicable, divided by the applicable number of annual installments.
(b)Subsequent annual installments shall be paid in January of each year following the initial payment in this Section 7.2.2. The amount of each installment shall be determined by dividing the balance in the applicable Source by the number of payments remaining to be made.
7.2.3 If a Participant so elects at the time of the underlying set date deferral election, then upon the Participant’s Separation from Service prior to the commencement of payments under this Section 7.2, the balances in the Participant’s Set Date Lump Sum Source, Set Date 5-Year Source, and Set Date 10-Year Source shall be paid in the time and form set forth in Section 7.1.1 (i.e., in lump sum in connection with such Separation from Service).
7.3 Death. Upon receipt of proper proof of death of a Participant who has died in service, or a former Participant who has been receiving payments under Section 7.1 or 7.2 above, notwithstanding any contrary elections or designations pursuant to Section 7.1 or 7.2, the balance in the Participant’s Account shall be paid in a lump sum to the Participant’s Beneficiary. Payment shall be made by the last day of the first full calendar month following the receipt of proper proof of the Participant’s death.
7.4 Subsequent Elections. With the consent of the Plan Administrator, a Participant may change the form and timing of payment for the balance in each Source within the Participant’s Account; provided that such subsequent election complies with Section 409A(a)(4)(C) of the Code and any other applicable rules or regulations, as determined by the Plan Administrator in its sole discretion, which shall, to the extent required to avoid the imposition of taxes or penalties under Section 409A, include the following requirements:
(a)The new election may not take effect until at least twelve (12) months after the date on which the new election is made;
(b)The date on which the new election is made must be at least twelve (12) months before the payment is scheduled to commence; and
(c) The new election must provide for the deferral of the payment for a period of at least five (5) years from the date such payment would otherwise have been made.
In the event a Participant makes a subsequent election pursuant to this Section 7.4, the Plan Administrator may reallocate the Sources of such Participant’s Account accordingly.
7.5 Unforeseeable Emergency. In the event of an Unforeseeable Emergency, a Participant may apply to the Plan Administrator for a distribution of all or part of the total vested amount credited to the Participant’s Account. The distribution may be granted in the Plan Administrator’s sole discretion upon a determination by the Plan Administrator that the amount distributed is reasonably necessary to satisfy the emergency need based on the relevant facts and circumstances of the case. Under Section 409A, an Unforeseeable Emergency means a severe financial hardship to the Participant resulting from any of the following:
(a)Illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent;
(b)Loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance); or
(c)Other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
Section 409A states that the purchase of a home and the payment of college tuition are not unforeseeable emergencies. Under Section 409A, a distribution on account of an Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan. In other words, Participants will not be eligible for consideration of distributions from the Plan for an Unforeseeable Emergency if the Participant has or through his or her or own ability has access to any funds to help take care of the financial issues related to the Participant’s Unforeseeable Emergency.
Unforeseeable Emergency distributions will be deducted from the vested Sources within the Participant’s Account until exhausted in the following order of precedence: Separation Lump Sum Source, Set Date Lump Sum Source, Separation 5-Year Source, Set Date 5-Year Source, Separation 10-Year Source, and Set Date 10-Year Source.
7.6 Account Liquidation. Notwithstanding anything to the contrary in this Section 7, a Participant with a vested Account balance not greater than the applicable dollar amount under Section 402(g)(1)(B) of the Code at the time of Separation from Service shall be paid that vested balance in a lump sum not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service, provided that the payment results in the termination and liquidation of the entirety of the Participant’s interest under the Plan.
7.7 Acceleration of Payments. Notwithstanding the foregoing, payments may be made upon the occurrence of one of the following events prior to the Participant’s Separation from Service and to the extent so made shall reduce the balance to the Participant’s Account.
7.7.1 Payment upon Income Inclusion under Section 409A. If this Plan fails to meet the requirements of Section 409A, the amount of a Participant’s Account that is required to be included in the income of the affected Participant due to such failure shall be paid to such Participant in a single lump sum.
7.7.2 Conflicts of Interest. Each Participant’s Account shall be paid at such time and to the extent permitted by Section 1.409A-3(j)(4)(iii) of the Treasury Regulations in connection with ethics agreements with the federal government and applicable federal, state, local, or foreign ethics or conflicts of interest laws.
7.7.3 Termination of Plan. Each Participant’s Account shall be paid to the Participant in a single lump sum upon termination of the Plan to the extent provided in Section 9, provided that such termination and distribution satisfies the applicable requirements of Section 409A.
8. PLAN ADMINISTRATION
8.1 Plan Administrator. The Plan shall be administered by the Plan Administrator. Subject to the express provisions of the Plan, the Plan Administrator shall have the power, authority, and sole and exclusive discretion to construe, interpret, and administer the Plan, including without limitation, the power and authority to make factual determinations relating to, and correct mistakes in, awards, and to take such other action in the administration and operation of the Plan as the Plan Administrator deems appropriate under the circumstances, including but not limited to the following:
8.1.1 The Plan Administrator may, from time to time, prescribe forms and procedures for carrying out the purposes and provisions of the Plan.
8.1.2 The Plan Administrator shall have the authority to prescribe the terms of any communications made under the Plan, to interpret and construe the Plan, any rules and regulations under the Plan, and the terms and conditions of any award, and to answer all questions arising under the Plan, including questions on the proper construction and interpretation of the Plan.
8.1.3 The Plan Administrator may (a) notify each Participant that he or she has been selected as a Participant and (b) obtain from each Participant such agreements and powers and designations of Beneficiaries as the Plan Administrator shall reasonably deem necessary for the administration of the Plan.
8.1.4 To the extent permitted by law, the Plan Administrator may at any time delegate such powers and duties to one or more other executives or managers, whether ministerial or discretionary, as the Plan Administrator may deem appropriate, including but not limited to, authorizing the Plan Administrator’s delegate to execute documents on the Plan Administrator’s behalf.
8.2 Determinations by Plan Administrator. All decisions, determinations, and interpretations by the Plan Administrator regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of or operation of any Plan award, shall be final and binding on all Participants, Beneficiaries, heirs, assigns, or other persons holding or claiming rights under the Plan or any award. The Plan Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, in making such decisions, determinations, and interpretations including, without limitation, the recommendations or advice of the Board, CEO, or any other employee of TVA and such consultants and accountants as it deems appropriate.
9. AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Plan without the consent of any Participant, Beneficiary, or other person, provided that TVA and the Plan Administrator, after any such termination, shall continue to have full administrative powers to take any and all action contemplated by the Plan which is necessary or desirable and to make payment of any outstanding balances earned by Participants in accordance with the terms of the Plan. No amendment or termination of the Plan may adversely affect, other than as specified in the Plan, any right acquired by any Participant or any Beneficiary of a Participant’s Account established before the effective date of such amendment or termination without such Participant’s consent. Upon termination of the Plan, distribution of
Account balances shall be made to Participants and Beneficiaries in the manner and at the time described herein, unless the Plan Administrator determines in its sole discretion that all such amounts shall be distributed upon termination of the Plan.
10. GENERAL PROVISIONS
10.1 Non-Transferability of Rights and Interests. Neither a Participant nor a Beneficiary may alienate, assign, transfer, or otherwise encumber his or her rights and interests under the Plan. No such interest or right to receive a distribution may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person, and any attempt to do so shall be null and void. In the event of a Participant’s death, the Plan Administrator shall authorize payment of any award due a Participant under the Plan to the Participant’s Beneficiary.
10.2 Compliance with Section 409A. At all times, to the extent Section 409A applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board or the Plan Administrator, or the Participants or their Beneficiaries, shall not be taken (or shall be void and without effect) if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein. To the extent necessary to prevent the imposition of taxes or penalties under Section 409A, (i) amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six-month period immediately following a Separation from Service shall instead be paid on the first business day after the date that is six (6) months following such Separation from Service (or death, if earlier), (ii) each amount to be paid or benefit to be provided under this Plan shall be construed as a separately identified payment for purposes of Section 409A, and (iii) any payments that are due within the “short term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requires otherwise.
10.3 Severability. In the event that any provision or portion of the Plan shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of the Plan shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
10.4 Limitation of Rights. Nothing in the Plan shall be construed to give any employee any right to be selected as a Participant or to receive an award or to be granted an award other than as is provided in this document. During the lifetime of a Participant, only the Participant (or the Participant’s legal representative) may exercise the rights and receive the benefits of any award.
10.5 Titles. The titles of the articles and sections herein are included for convenience of reference only and shall not be construed as part of the Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine. Such words as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.
10.6 Governing Law. TVA is a corporate agency and instrumentality of the United States, and the Plan shall be governed by and construed under federal law. In the event federal law does not provide a rule of decision for any matter or issue under the Plan, the law of the State of Tennessee shall apply; provided, however, in no event shall Tennessee’s choice of law provisions apply.
10.7 Authorized Representatives. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized representative of TVA.
10.8 Certain Rights and Limitations. Nothing in the Plan or any award issued pursuant to the Plan shall be construed as conferring any legal rights upon any employee or other person for a continuation of employment, nor shall it interfere with the rights of TVA to discharge any employee and to treat any employee without regard to the effect that such treatment might have upon that employee as a Participant in the Plan.
10.9 Tax Withholding. TVA is authorized to withhold from any payment under the Plan taxes due or potentially payable in connection with any transactions involving the Plan, and to take any other actions TVA may deem advisable to allow TVA to satisfy obligations for the payment of withholding taxes and other tax obligations related to payments under the Plan.
10.10 No Trust Is Created. No trust in favor of any Participant is created by this Plan, and Participants shall have the rights of general unsecured creditors of TVA with respect to amounts credited their Accounts established by this Plan.
Exhibit 10.7
DEFERRED COMPENSATION PLAN
Amended and Restated as of May 9, 2024
Prepared by: /s/ Rebecca Tolene 5-9-24
Rebecca Tolene, VP & Chief of Staff Date
Validation Date: 05/09/2024
Review Frequency: 3 years
Validated By: Stephen Gaby
Table of Contents
| | | | | | | | |
| |
| Section 1: PURPOSE | 3 |
| 1.1 | Establishment | 3 |
| 1.2 | Purpose | 3 |
| |
| Section 2: DEFINITIONS | 3 |
| 2.1 | Account | 3 |
| 2.2 | Beneficiary | 3 |
| 2.3 | Board | 3 |
| 2.4 | Code | 3 |
| 2.5 | Dependent | 4 |
| 2.6 | Interest | 4 |
| 2.7 | Plan Administrator | 4 |
| 2.8 | Recordkeeper | 4 |
| 2.9 | Return | 4 |
| 2.10 | Section 409A | 4 |
| 2.11 | Separation 5-Year Source | 4 |
| 2.12 | Separation 10-Year Source | 4 |
| 2.13 | Separation from Service | 4 |
| 2.14 | Separation Lump Sum Source | 4 |
| 2.15 | Set Date 5-Year Source | 4 |
| 2.16 | Set Date 10-Year Source | 4 |
| 2.17 | Set Date Lump Sum Source | 5 |
| 2.18 | Source | 5 |
| 2.19 | Unforeseeable Emergency | 5 |
| | |
| Section 3: ELIGIBILITY TO PARTICIPATE | 5 |
| | |
| Section 4: PLAN GUIDELINES | 5 |
| 4.1 | Deferred Compensation Plan Credits | 5 |
| | |
| Section 5: PAYMENT OF DEFERRED COMPENSATION | 6 |
| 5.1 | Separation from Service | 6 |
| 5.2 | Set Payment Date | 7 |
| 5.3 | Death | 8 |
| 5.4 | Subsequent Elections | 8 |
| 5.5 | Unforeseeable Emergency | 9 |
| 5.6 | Account Liquidation | 9 |
| | |
| Section 6: PLAN ADMINISTRATION | 10 |
| 6.1 | Plan Administrator | 10 |
| 6.2 | Determinations by Plan Administrator | 10 |
| | |
| Section 7: AMENDMENT OR TERMINATION OF THE PLAN | 11 |
| | |
| Section 8: GENERAL PROVISIONS | 11 |
| 8.1 | Non-Transferability of Rights and Interests | 11 |
| 8.2 | Compliance with Section 409A | 11 |
| 8.3 | Severability | 12 |
| 8.4 | Limitation of Rights | 12 |
| 8.5 | Titles | 12 |
| 8.6 | Governing Law | 12 |
| 8.7 | Authorized Representatives | 12 |
| 8.8 | Certain Rights and Limitations | 13 |
| 8.9 | Tax Withholding | 13 |
| 8.10 | No Trust Is Created | 13 |
1.PURPOSE
1.1Establishment. The Tennessee Valley Authority (“TVA”) hereby amends and restates in its entirety its Deferred Compensation Plan (the “Plan”). The Plan supports TVA’s compensation philosophy, which is designed to attract, retain, and engage employees needed to accomplish TVA’s broad mission.
1.2Purpose. The Plan is designed to provide Participants with (a) deferrals of compensation in order to provide income to supplement retirement benefits, (b) an additional means of deferring taxes on deferred compensation, and (c) an opportunity to earn a notational investment return on deferred compensation.
2.DEFINITIONS
Wherever used herein, the following terms have the meaning set forth below, unless a different meaning is clearly required by the context:
2.1“Account” means the account established on TVA’s books in the name of each Participant to which compensation deferred by the Participant pursuant to any of TVA’s compensation plans, or deferred compensation awarded to the Participant by TVA, as well as any Interest or Return on such compensation, is accounted for in the form of credits.
2.2“Beneficiary” means, collectively, such persons and/or entities as the Participant designates to be the Participant’s beneficiary or beneficiaries under this Plan. The Participant may make, change, or revoke a Beneficiary designation at any time before his or her death without the consent of the Participant’s spouse or anyone the Participant previously named as a Beneficiary, and the Participant may designate primary and secondary Beneficiaries. A Beneficiary designation must comply with procedures established by the Plan Administrator (as defined below) and must be received by the Plan Administrator before the Participant’s death. If the Participant dies without a valid Beneficiary designation (as determined by the Plan Administrator), then such Participant’s Beneficiary shall mean (a) the widow or widower of the Participant; (b) if there is no widow or widower, the child or children of the Participant and descendants of deceased children by representation; (c) if none of the above, then the duly appointed legal representative of the estate of the Participant; and (d) if none of the above, then the person or entity so entitled under the law of the state of domicile of the Participant at the time of death.
2.3“Board” means the Board of Directors of TVA.
2.4“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder.
2.5“Dependent” has the meaning ascribed thereto in Section 152 of the Code without regard to Section 152(b)(1), (b)(2), and (d)(1)(B) of the Code.
2.6“Interest” means the notational interest on a Participant’s Account balance based on an annual interest rate set from time to time by the Plan Administrator or its designee.
2.7“Plan Administrator” means, unless otherwise designated by the Board, the Chief Executive Officer (“CEO”) or the designee of the CEO. When the CEO is a Participant, the Board or the designee of the Board shall be the Plan Administrator with respect to matters affecting the CEO.
2.8“Recordkeeper” means the organization selected by TVA to recordkeep the notational investment return alternatives from which the Participant may choose.
2.9“Return” means the notational investment return on a Participant’s Account balance based on the change in the value of the mutual funds designated by the Participant.
2.10“Section 409A” means Section 409A of the Code and the regulations and other binding guidance thereunder.
2.11“Separation 5-Year Source” means a deferred compensation Source that is paid in five (5) annual installments in connection with a Participant’s Separation from Service pursuant to Section 5.1.
2.12“Separation 10-Year Source” means a deferred compensation Source that is paid in ten (10) annual installments in connection with a Participant’s Separation from Service pursuant to Section 5.1.
2.13“Separation from Service” and like phrases have the meaning set forth in Treas. Regs. § 1.409A-1(h) as in effect from time to time.
2.14“Separation Lump Sum Source” means a deferred compensation Source that is paid in lump sum in connection with a Participant’s Separation from Service pursuant to Section 5.1.
2.15“Set Date 5-Year Source” means a deferred compensation Source that is paid in five (5) annual installments in connection with the occurrence of a set date pursuant to Section 5.2.
2.16“Set Date 10-Year Source” means a deferred compensation Source that is paid in ten (10) annual installments in connection with the occurrence of a set date pursuant to Section 5.2.
2.17“Set Date Lump Sum Source” means a deferred compensation Source that is paid in lump sum in connection with the occurrence of a set date pursuant to Section 5.2.
2.18“Source” means a division within each Participant’s Account to which deferred compensation credits are assigned based on the time and form of payment for such deferred compensation.
2.19“Unforeseeable Emergency” has the meaning ascribed thereto in Treas. Regs. § 1.409A-3(i)(3).
3.ELIGIBILITY TO PARTICIPATE
Participation in the Plan is limited to TVA employees who are eligible under any of TVA’s other compensation plans to (a) defer compensation earned during a year to a later year or (b) receive deferred compensation credits, in each case as determined by the Plan Administrator in its sole discretion (each, a “Participant”).
4.PLAN GUIDELINES
4.1Deferred Compensation Plan Credits
4.1.1There shall be established for each Participant an Account in the name of the Participant. Each Participant’s Account will consist of one or more Sources.
4.1.2A Participant’s Account shall be credited with any compensation amounts that the Participant earns during any year and properly elects to defer to a later year pursuant to any TVA compensation plan that allows deferral elections.
4.1.3From time to time the Plan Administrator may, in its sole discretion, award deferred compensation credits to a Participant’s Account. At the time of the award, the Plan Administrator shall designate the manner in which such deferred compensation credits shall be paid out to the Participant. In the absence of such a designation, such deferred compensation credits shall be paid out to the Participant in a lump sum upon Separation from Service in accordance with Section 5 below.
4.1.4The Plan Administrator may consider such factors as the following in determining whether to award deferred compensation credits to a Participant and the amount of deferred compensation credits to be awarded pursuant to section 4.1.3 above:
•Meritorious performance;
•Providing Participants with total compensation equivalent to prevailing rates in corporate, professional, and other public organizations;
•The need to use deferred compensation credits for recruitment purposes;
•Forfeited annual leave; or
•Such other factors as may be deemed appropriate.
4.1.5Each Participant’s Account will receive Interest calculated on the ending daily balance in each Participant’s Account and credited to the Account by the Recordkeeper at the end of each month. In lieu of Interest, each Participant may elect to have all or a portion of the Participant’s Account adjusted by the Return tied to one or more mutual funds available to Participants through the Recordkeeper as selected by the Participant. TVA is not responsible for the effect on the Participant’s Account of decisions by any Participant who elects to receive the Return tied to mutual funds as provided herein. Such decisions shall be the sole responsibility of the Participant.
5.PAYMENT OF DEFERRED COMPENSATION
The total amount credited to each Participant’s Account shall be paid by TVA to the Participant pursuant to Section 5.1 in connection with the Participant’s Separation from Service, pursuant to Section 5.2 upon the specific date selected, pursuant to Section 5.3 upon the Participant’s death, pursuant to Section 5.4 as subsequently elected, or pursuant to Section 5.5 in the event of an Unforeseeable Emergency, in each case as applicable. To the extent necessary to prevent the imposition of taxes or penalties under Section 409A, each election and payment under the Plan shall be made at a time and in a manner that complies with Section 409A.
5.1Separation from Service. With respect to amounts elected or designated to be paid in connection with a Participant’s Separation from Service, a Participant must elect (or, with respect to Section 4.1.3, TVA must designate) payments in the form of lump sum, five (5) annual installments, or ten (10) annual installments, which shall respectively be paid from the Participant’s Separation Lump Sum Source, Separation 5-Year Source, and Separation 10-Year Source.
5.1.1The balance in the Separation Lump Sum Source shall be paid in a lump sum to the Participant no later than the last day of the first full calendar month following the date of the Participant’s Separation from Service (or, if applicable, the later payment date elected in Section 5.1.3).
5.1.2The balances in the Separation 5-Year Source and Separation 10-Year Source shall be paid in the following manner:
•Not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service (or, if applicable, the later payment commencement date elected in Section 5.1.3), the Participant shall be paid a sum equal to the balance in the Participant’s Separation 5-Year Source or Separation 10-Year Source, as applicable, divided by the applicable number of annual installments.
•Subsequent annual installments shall be paid in January of each year following the initial payment in this Section 5.1.2. The amount of each installment shall be determined by dividing the balance in the applicable Source by the number of payments remaining to be made.
5.1.3Participants shall be permitted to elect a payment date or payment commencement date, as applicable, that is in January following the date of Separation from Service plus a period of whole years not to exceed ten (10) years (example: 5 years from the January following the date of Separation from Service), in which case the payment date or payment commencement date, as applicable, in Sections 5.1.1 or 5.1.2, respectively, shall be adjusted.
5.1.4Effective January 1, 2009, the option to elect the 15-Year Source was eliminated for deferrals on and after that date. No new Participants have been allowed to elect a 15-Year Source since that date and none will be added.
5.2Set Payment Date. With respect to amounts elected or designated to be paid in connection with the occurrence of a set date (example: January 1, 2025), a Participant must elect (or, with respect to Section 4.1.3, TVA must designate) (a) a set payment date or payment commencement date, as applicable, that is in January and no more than ten (10) years following such election date, and (b) payments in the form of lump sum, five (5) annual installments, or ten (10) annual installments, which shall respectively be paid from the Participant’s Set Date Lump Sum Source, Set Date 5-Year Source, and Set Date 10-Year Source.
5.2.1The balance in the Set Date Lump Sum Source shall be paid in a lump sum to the Participant no later than the last day of January in the year elected for payment.
5.2.2The balances in the Set Date 5-Year Source and Set Date 10-Year Source shall be paid in the following manner:
•No later than the last day of January starting in the year elected for payment commencement, the Participant shall be paid a sum equal to the balance in the Participant’s Set Date 5-Year
Source or Set Date 10-Year Source, as applicable, divided by the applicable number of annual installments.
•Subsequent annual installments shall be paid in January of each year following the initial payment in this Section 5.2.2. The amount of each installment shall be determined by dividing the balance in the applicable Source by the number of payments remaining to be made.
5.2.3If a Participant so elects at the time of the underlying set date deferral election, then upon the Participant’s Separation from Service prior to the commencement of payments under this Section 5.2, the balances in the Participant’s Set Date Lump Sum Source, Set Date 5-Year Source, and Set Date 10-Year Source shall be paid in the time and form set forth in Section 5.1.1 (i.e., in lump sum in connection with such Separation from Service).
5.3Death. Upon receipt of proper proof of death of a Participant who has died in service, or a former Participant who has been receiving payments under Sections 5.1 or 5.2 above, notwithstanding any contrary elections or designations pursuant to Sections 5.1 or 5.2, the balance in the Participant’s Account shall be paid in a lump sum to the Participant’s Beneficiary. Payment shall be made by the last day of the first full calendar month following the receipt of proper proof of the Participant’s death.
5.4Subsequent Elections. With the consent of the Plan Administrator, a Participant may change the form and timing of payment for the balance in each Source within the Participant’s Account; provided that such subsequent election complies with Section 409A(a)(4)(C) of the Code and any other applicable rules or regulations, as determined by the Plan Administrator in its sole discretion, which shall, to the extent required to avoid the imposition of taxes or penalties under Section 409A, include the following requirements:
•The new election may not take effect until at least twelve months after the date on which the new election is made;
•The date on which the new election is made must be at least twelve months before the payment is scheduled to commence; and
•The new election must provide for the deferral of the payment for a period of at least five years from the date such payment would otherwise have been made.
In the event a Participant makes a subsequent election pursuant to this Section 5.4, the Plan Administrator may reallocate the Sources of such Participant’s Account accordingly.
5.5Unforeseeable Emergency. In the event of an Unforeseeable Emergency, a Participant may apply to the Plan Administrator for a distribution of all or part of the total amount credited to the Participant’s Account. The distribution may be granted in the Plan Administrator’s sole discretion upon a determination by the Plan Administrator that the amount distributed is reasonably necessary to satisfy the emergency need based on the relevant facts and circumstances of the case. Under Section 409A, an Unforeseeable Emergency means a severe financial hardship to the Participant resulting from any of the following:
•Illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or the Participant’s dependent;
•Loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance); or
•Other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
Section 409A states that the purchase of a home and the payment of college tuition are not unforeseeable emergencies. Under Section 409A, a distribution on account of an Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan. In other words, Participants will not be eligible for consideration of distributions from the Plan for an Unforeseeable Emergency if the Participant has or through his or her or own ability has access to any funds to help take care of the financial issues related to the Participant’s Unforeseeable Emergency.
Unforeseeable Emergency distributions will be deducted from the Sources within the Participant’s Account until exhausted in the following order of precedence: Separation Lump Sum Source, Set Date Lump Sum Source, Separation 5-Year Source, Set Date 5-Year Source, Separation 10-Year Source, and Set Date 10-Year Source.
5.6Account Liquidation. Notwithstanding anything to the contrary in this Section 5, a Participant with an Account balance not greater than the applicable dollar amount under Section 402(g)(1)(B) of the Code at the time of Separation from Service shall be paid that balance in a lump sum not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service,
provided that the payment results in the termination and liquidation of the entirety of the Participant’s interest under the Plan.
6.PLAN ADMINISTRATION
6.1Plan Administrator. The Plan shall be administered by the Plan Administrator. Subject to the express provisions of the Plan, the Plan Administrator shall have the power, authority, and sole and exclusive discretion to construe, interpret, and administer the Plan, including without limitation, the power and authority to make factual determinations relating to, and correct mistakes in, awards, and to take such other action in the administration and operation of the Plan as the Plan Administrator deems appropriate under the circumstances, including but not limited to the following:
6.1.1The Plan Administrator may, from time to time, prescribe forms and procedures for carrying out the purposes and provisions of the Plan.
6.1.2The Plan Administrator shall have the authority to prescribe the terms of any communications made under the Plan, to interpret and construe the Plan, any rules and regulations under the Plan, and the terms and conditions of any award, and to answer all questions arising under the Plan, including questions on the proper construction and interpretation of the Plan.
6.1.3The Plan Administrator may (a) notify each Participant that he or she has been selected as a Participant and (b) obtain from each Participant such agreements and powers and designations of Beneficiaries as the Plan Administrator shall reasonably deem necessary for the administration of the Plan.
6.1.4To the extent permitted by law, the Plan Administrator may at any time delegate such powers and duties to one or more other executives or managers, whether ministerial or discretionary, as the Plan Administrator may deem appropriate, including but not limited to, authorizing the Plan Administrator’s delegate to execute documents on the Plan Administrator’s behalf.
6.2Determinations by Plan Administrator. All decisions, determinations, and interpretations by the Plan Administrator regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of or operation of any Plan award, shall be final and binding on all Participants, Beneficiaries, heirs, assigns, or other persons holding or claiming rights under the Plan or any award. The Plan Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, in making such decisions, determinations, and interpretations including, without limitation, the recommendations or advice of the Board, CEO, or any other
employee of TVA and such consultants and accountants as it deems appropriate.
7.AMENDMENT OR TERMINATION OF THE PLAN
The Board, or its designee, may at any time amend or terminate the Plan without the consent of any Participant, Beneficiary, or other person; provided, that TVA and the Plan Administrator, after any such termination, shall continue to have full administrative powers to take any and all action contemplated by the Plan which is necessary or desirable and to make payment of any outstanding balances earned by Participants in accordance with the terms of the Plan. No amendment or termination of the Plan may adversely affect, other than as specified in the Plan, any right acquired by any Participant or any Beneficiary of a Participant’s Account established before the effective date of such amendment or termination without such Participant’s consent. Upon termination of the Plan, distribution of Account balances shall be made to Participants and Beneficiaries in the manner and at the time described herein, unless the Plan Administrator determines in its sole discretion that all such amounts shall be distributed upon termination of the Plan.
8.GENERAL PROVISIONS
8.1Non-Transferability of Rights and Interests. Neither a Participant nor a Beneficiary may alienate, assign, transfer, or otherwise encumber his or her rights and interests under the Plan. No such interest or right to receive a distribution may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person, and any attempt to do so shall be null and void. In the event of a Participant’s death, the Plan Administrator shall authorize payment of any award due a Participant under the Plan to the Participant’s Beneficiary.
8.2Compliance with Section 409A. At all times, to the extent Section 409A applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board or the Plan Administrator, or the Participants or their Beneficiaries, shall not be taken (or shall be void and without effect) if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein. To the extent necessary to prevent the imposition of taxes or penalties under Section 409A, (i) amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six-month period
immediately following a Separation from Service shall instead be paid on the first business day after the date that is six (6) months following such Separation from Service (or death, if earlier), (ii) each amount to be paid or benefit to be provided under this Plan shall be construed as a separately identified payment for purposes of Section 409A, and (iii) any payments that are due within the “short term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requires otherwise.
8.3Severability. In the event that any provision or portion of the Plan shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of the Plan shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
8.4Limitation of Rights. Nothing in the Plan shall be construed to give any employee any right to be selected as a Participant or to receive an award or to be granted an award other than as is provided in this document. During the lifetime of a Participant, only the Participant (or the Participant’s legal representative) may exercise the rights and receive the benefits of any award.
8.5Titles. The titles of the articles and sections herein are included for convenience of reference only and shall not be construed as part of the Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine. Such words as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.
8.6Governing Law. TVA is a corporate agency and instrumentality of the United States, and the Plan shall be governed by and construed under federal law. In the event federal law does not provide a rule of decision for any matter or issue under the Plan, the law of the State of Tennessee shall apply; provided, however, in no event shall Tennessee’s choice of law provisions apply.
8.7Authorized Representatives. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized representative of TVA.
8.8Certain Rights and Limitations. Nothing in the Plan or any award issued pursuant to the Plan shall be construed as conferring any legal rights upon any employee or other person for a continuation of employment, nor shall it interfere with the rights of TVA to discharge any employee and to treat any employee without regard to the effect that such treatment might have upon that employee as a Participant in the Plan.
8.9Tax Withholding. TVA is authorized to withhold from any payment under the Plan taxes due or potentially payable in connection with any transactions involving the Plan and to take any other actions TVA may deem advisable to allow TVA to satisfy obligations for the payment of withholding taxes and other tax obligations related to payments under the Plan.
8.10No Trust Is Created. No trust in favor of any Participant is created by this Plan, and Participants shall have the rights of general unsecured creditors of TVA with respect to amounts credited their Accounts established by this Plan.
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