Lebanon
“In the face of a 0.8 percent negative margin this year, we were unable to recommend a matching contribution for eligible employees,” John Malanowski, the chief human resources officer, and Daniel Jantzen, the chief financial officer, said in a memorandum dated Thursday and addressed to “all Dartmouth-Hitchcock Physicians and Staff.”
D-H makes a base contribution ranging from 1 percent to 7 percent of the pay of an eligible employee, and may make an additional discretionary matching contribution as an “incentive for you to save for your own retirement” based on the organization’s financial performance, according to explanatory materials available with the announcement. The retirement accounts in question are similar to 401(k) plans.
D-H’s “base, transition and discretionary match contributions based on specified percentages of compensation and employees deferral amounts” totaled $30.2 million in fiscal 2015 and $33.1 million the previous year, according to D-H’s audited financial statement for fiscal 2015.
Only the discretionary matching contributions would be suspended, according to Malanowski and Jantzen. The cut “only affects those who contribute to their retirement savings and would normally be eligible for a matching contribution for the 2015 calendar year,” they wrote.
Rick Adams, a D-H spokesman, confirmed that an announcemet had been made but could not immediately say how much of D-H’s overall retirement funding would be affected by the suspension.
D-H has relied increasingly on retirement accounts funded by employee and employer contributions and managed by employees and is preparing to turn off the spigot of contributions to its traditional pension plans, which are managed by employers and leave them obligated to have the money there when promised.
Nationally, about 48 percent of all employers and 95 percent of those with over 500 employees offered some kind of retirement plans, according to a March 2015 survey by the U.S. Bureau of Labor Statistics. Only 8 percent of all employers but 52 percent of those with more than 500 employees offered traditional pension plans.
Next year will be the last that Dartmouth-Hitchcock will contribute to the traditional pension, or so-called “defined benefit,” plans that make up at least a portion of the retirement packages of nearly 4,000 employees.
Such plans are funded by employers, who are responsible for managing the investment of plan assets and for paying out pensions when employees retire. D-H projected that it would contribute $37 million to its pension plans during the current fiscal year.
Since February 2006, all newly hired employees have been excluded from the pension plan and instead were offered the opportunity to enroll in a defined contribution plan.
In such plans, an employee can make a contribution to a retirement account and that contribution is deducted from the amount subject to federal income tax that year. The contributed amount is still subject to Social Security and Medicare taxes.
Employees are responsible for managing the investment of assets in a personal account,
Employers often make matching or other contributions to such accounts. The assets that accumulate in such accounts are taken out during retirement and generally taxed as ordinary income.
The 2013 termination of traditional pension programs was expected to save D-H $6 million to $8 million a year, hospital officials said at the time.
D-H will meet its outstanding obligations to employees who earned pension benefits through “bulk lump sum offerings or purchases of annuity contracts,” according to its audited financial statement for the fiscal year that ended June 30, 2015.
After paying out $34.8 million in pension benefits and $45 million in settlements, D-H ended that year with benefit obligations totaling $988.1 million and plan assets of $845.1 million.
Pension financial projections assume an annual return on assets of 7.75 percent.
More than half of the assets were held as bonds, and more than one quarter were in stocks.
The unfunded obligations, which totaled $143.1 million at the end of the year, grew partially as the result of affiliation deals that year, which added $95.3 million in liabilities but only $77.6 million in assets. During that year, D-H took control of Mt. Ascutney Hospital and Health Center in Windsor and Cheshire Medical Center in Keene.