According to the SEI announcement, health care organizations are increasingly challenged to control the pension impact on overall corporate finances. Of all of the organizations polled, 48% said eliminating or reducing investment volatility is a key driver in making a change and 47% said the goal was to eliminate or reduce costs. A news release from SEI said 66% of those thinking about making changes will put that change into place by the end of 2008.
A significant portion (22%) said their organization’s board had asked for a pension evaluation.
“Volatility in the pension plan is just one example of how an organizational asset pool can impact corporate finances,” said Jim Morris, SEI’s Senior Vice President, Global Institutional Solutions, in the news release. “Within health care, increased organizational scrutiny has resulted in a focused effort to control the risks that portfolio decisions for balance sheet and non-balance sheet assets can present to the organization.”
The poll suggested that health care organizations are considering plan design changes in anticipation of the Pension Protection Act (PPA) funding requirements to be phased in starting in 2008 when rules will require 100% funding status. According to the poll, on an Accrued Benefit Obligation (ABO) basis, less than 20% of those polled are currently at or over 100% funded and more than a third are under the 90% funding point.
The poll shows that 62% have already or are considering defined contribution plans as an alternative solution, while 25% said they are not considering a replacement.
The types of health care organizations polled included systems consisting of multiple hospitals or clinics (48%), stand-alone hospitals or clinics (47%) and hospital affiliated educational programs (5%).
A complete summary of the poll is available by emailing firstname.lastname@example.org .