Singing River Health System (SRHS) CEO Kevin Holland told the Alabama Press-Register that employees currently contributing to the plan were told they would receive 50% of their salaries upon retirement. SRHS required those employees to contribute 3% of their salaries, and the system was to make up any difference necessary to help them draw 50% upon retirement. There are 2,389 people in that plan now, Holland said, and 623 of those are retired and currently drawing money.
The defined benefit pension plan was closed to new employees in 2011, and new employees are offered a defined contribution 403(b) plan. The pension plan has more than $136 million in assets, but anticipated future need is at more than $285 million, given the current number of retirees and active employee participants, Holland told the newspaper. He said the health system simply cannot afford to offer the same level of retirement benefits previously promised.
So, employees were sent an email offering them the option to receive a lump sum payment equal to their total prior contributions, with interest calculated at the three month treasury rate over the life of their contributions. They were also presented with the option of rolling their prior contributions into a new defined benefit pension plan that will provide a defined benefit which is lower than the one in the old plan.
That lump-sum payment could be rolled into the 403(b) plan tax free, Holland noted. SRHS will no longer be able to promise retirees 50% of their salaries, but a new percentage for the new defined benefit pension plan has not yet been determined.
Holland said there would be no more contributions required from the employee under the new pension plan, and additional benefits would not accrue. “It will be a fixed defined benefit based on the prior years of service as of the date of transition,” he said.
The news report noted that the 403(b) plan includes a 50% employer match of up to 6% of salary an employee contributes to the plan.
As for those who are already retired and currently receiving benefits under the defined benefit plan, Holland said he's not sure yet if their benefits will be cut, and “they will get special consideration in the process.”
In a separate report, the Alabama Press-Register said more than 300 current and former Singing River Health System workers met with attorneys to discuss their legal options. Some expressed concerns that they would not get back the money they put into the pension plan. An attorney told them they would definitely get that money back, but, “The question is what more do they owe you for breaching their fiduciary duty to you.”
A former executive with SRHS told another newspaper, the Biloxi-Gulfport, Mississippi-based Sun Herald, that he warned leaders of the system two years ago about the issues with the pension plan, but his suggestions went unheeded.