Elliot Health System in New Hampshire announced it will freeze its defined benefit (DB) plan as of December 31.
This affects more than 600 employees hired before July 1, 2006, who were eligible for the DB plan. The health system has more than 4,000 employees.
Affected employees will now be eligible to receive employer contributions in the health system’s 401(k) and 403(b) plans. They previously were not eligible to receive either core contributions or matching contributions.
According to Elliot’s retirement plan website, both the 401(k) and 403(b) offer an employer matching contribution of 50% of employee deferrals up to 4% of salary. The firm may also make a core contribution of 3% of an employee’s annual pay, depending on eligibility conditions.
In a newsletter to employees, the health system explained that it has been considering freezing the DB plan for years, saying the adoption of the 401(k) and 403(b) plans was its “initial step toward this decision.” It also cited volatile pension expenses resulting “in an unsustainable expense which has a direct impact on our capability to serve the community’s needs.”Elliot also made the statement that “financial challenges in health care have led the vast majority of health care employers to make this decision years before we are doing so.” It said out of 26 local New Hampshire hospitals, only three have an active DB plan, and “nationally, less than one-fourth of health care employers offer a traditional defined benefit pension plan to their employees.”