MANCHESTER — Elliot Health System is freezing the pensions of more than 600 employees at year’s end in a move that will save several million dollars a year.
“It’s not like we’re taking a pension benefit away and opening up an ice cream stand,” health system President Greg Baxter said in an interview.
“We’ll use that money to meet all of our budget plans and meet our mission,” Baxter said after notifying employees Friday.
Elliot Health System is projecting it will receive $10 million less in Medicare and Medicaid reimbursement for its 2020 fiscal year, Baxter said.
Its pension liability also was increasing.
The pension change affects employees hired prior to July 1, 2006. Employees will receive a pension based on their service time through Dec. 31.
After that, the company will provide them with a 3 percent payment in either their 401(k) or 403(b) tax-deferred retirement plans. They also can receive an additional 2 percent in matching contributions.
Employees hired after July 1, 2006 received matching contributions in their 401(k) or 403(b) accounts, according to Baxter. There are more than 4,000 employees in the organization.
People will receive their pension based on what they accrued through 2019.
Only 13 percent of private-sector workers participated in a pension plan in 2017 and 51 percent participated in a workplace retirement plan, according to the Pension Rights Center, which cited federal figures.
Catholic Medical Center switched in January 2012 from a defined pension to a 403(b) plan “and we were able to do a very generous match for health care,” said Lauren Collins-Cline, CMC director of communications & PR.
That change affected more than 1,100 CMC employees.
Vanessa Stafford, vice president of communications for the New Hampshire Hospital Association, said she couldn’t speak to the motivation behind decisions individual hospitals made.
“However, trends would suggest that organizations as a whole are offering options like 401(k)/ 403(b) plans, which allow for employee and employer contributions,” Stafford said. “Given the challenging economics of pension liabilities as a result of volatile market dynamics, many organizations have chosen to shift their retirement benefit options in a way that allows them to better invest in their employees and serve their communities while planning for the future.”