Utah’s largest employer has sounded the death knell for its employee pension plan.
For 50 years, Intermountain Health has sponsored pension plans, which provide retirees a guaranteed payout, with amounts depending on how long workers were employed and how much they earned. That made Intermountain Health an outlier among Utah employers, even as it had been limiting access to the benefit in recent years.
The nonprofit healthcare system announced it will stop contributions to its pension plans at the end of 2026, as it transitions to an entirely 401(k)-based system in 2027.
The move will affect about a third of the system’s employees, or more than 22,000 caregivers, according to a news release. The pension has been closed to new workers since April 2020, and Intermountain had previously limited the benefit in 2007 and 2010, capping contributions for employees after they’d worked 30 years, it said in a statement provided to The Salt Lake Tribune.
Workers who previously qualified for pensions will still get them, but the company’s contributions will end after Dec. 31, 2026, and their benefits won’t grow even if the employees stay in the system. Retirees who have vested pension benefits, including those currently receiving those benefits, won’t be affected by this change, Intermountain said.
An Intermountain employee who has worked for the healthcare system for nearly 10 years told The Salt Tribune he is now rethinking his career. The employee, whose identity The Tribune has verified, asked not to be named due to his concerns about possible retaliation.
“My intention was, in total sincerity, I would stay here for 30 years,” he said. He said it would have taken some kind of “incredible opportunity” to move on, since no local competitors offered a pension.
Now, he expects to get about a fourth of the retirement payment he had planned to receive.
He hasn’t done the math yet to figure out how much to contribute to his 401(k) to offset the loss.
“To be completely frank,” he said, “I’ve been kind of trying not to think about it too much.”
Nationwide, the number of employees receiving pension benefits has been trending down since its peak in the late 1980s, according to the U.S. Department of Labor.
Pensions are a highly sought-after benefit, because they guarantee a set payment for employees who retire, said Karen Friedman, executive director of the Pension Rights Center, a Washington D.C.-based nonprofit that promotes retiree rights.
In these defined-benefit plans, employees often defer some of their wages into a pension trust and then receive a set benefit back in retirement — one guaranteed by a quasi-government agency called the Pension Benefit Guarantee Corporation.
“That’s a lifetime benefit that you can count on,” Friedman said.
However, these plans can end up being more expensive for a company than 401(k)s, which usually require contributions from employees. Those plans were introduced in the late 1970s and proliferated since then.
The 401(k)s have become the dominant retirement savings plans in the U.S. — an outcome some of its early proponents have come to regret — and can be riskier for employees, who must calculate how much money to contribute, where to invest, and how to make it “last for your lifetime,” Friedman said.
Friedman said Intermountain’s change could “throw a wrench” into the retirement plans of older employees who are nearing retirement.
Pension-plan employees will still be eligible for some significant retirement benefits. Intermountain Health said that, starting next year, they can receive an automatic contribution of 2% of their earnings to a 401(k). That can be complemented by an additional matching contribution of up to 4%.
While Intermountain’s 401(k) is above what many private companies offer, there are competitive deals elsewhere. University of Utah Health, for instance, offers a 401(k) plan with a 14.2% match.
According to Intermountain, 97% of healthcare organizations have already switched to 401(k) plans — a move it said “signals that maintaining traditional pensions has become financially unsustainable.”
“Like other healthcare organizations,” the statement read, “Intermountain Health has faced increasing financial pressures, including reduced government payments, inflation, and significant market volatility.”
Friedman said that Intermountain Health’s 401(k) offer is good, but “it is unlikely to be as good as the former plan.”
She also was concerned that Intermountain could reduce or end it at any time.
Some pension-eligible employees will also qualify for a medical savings account that can be used during retirement. Intermountain Health is offering to fund those accounts with $50,000 for eligible workers.
Intermountain said a combination of reduced government payments, inflation and market volatility influenced its decision to stop pension contributions.
The healthcare system added that the “freeze is not the result of the merger with legacy SCL Health or the actions of any group of caregivers.” Intermountain merged with the Colorado-based SCL Health in 2022.
Intermountain’s move away from pension plans is part of a larger trend that makes Friedman worried about future retirees’ livelihoods, given possible cuts to Social Security payments and statistics showing that around half of the private workforce doesn’t have retirement benefits to supplement Social Security.
As Americans grapple with higher costs, they are feeling “tension” between saving for retirement, paying off debts or attaining milestones like homeownership, said Dan Doonan, executive director of the National Institute on Retirement Security.
The institute released a report earlier this month that found the median balances in employee 401(k)s and other determined contribution plans was around $40,000 in December 2022. Across all workers, including those without savings, the median was just $955.
“It’s all about economic security,” Friedman said, “economic security while you’re working, and then economic security when you’re no longer able to work, or you’re too old to work.”
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