Utah\u2019s largest employer has sounded the death knell for its employee pension plan.<\/p>\n
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.<\/p>\n
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.<\/p>\n
The move will affect about a third of the system\u2019s employees, or more than 22,000 caregivers, according to a news release<\/a>. 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\u2019d worked 30 years, it said in a statement provided to The Salt Lake Tribune.<\/p>\n Workers who previously qualified for pensions will still get them, but the company\u2019s contributions will end after Dec. 31, 2026, and their benefits won\u2019t grow even if the employees stay in the system. Retirees who have vested pension benefits, including those currently receiving those benefits, won\u2019t be affected by this change, Intermountain said.<\/p>\n 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.<\/p>\n \u201cMy intention was, in total sincerity, I would stay here for 30 years,\u201d he said. He said it would have taken some kind of \u201cincredible opportunity\u201d to move on, since no local competitors offered a pension.<\/p>\n Now, he expects to get about a fourth of the retirement payment he had planned to receive. <\/p>\n He hasn\u2019t done the math yet to figure out how much to contribute to his 401(k) to offset the loss.<\/p>\n \u201cTo be completely frank,\u201d he said, \u201cI\u2019ve been kind of trying not to think about it too much.\u201d<\/p>\n 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.<\/a><\/p>\n 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>, a Washington D.C.-based nonprofit that promotes retiree rights.<\/p>\n 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 \u2014 one guaranteed by a quasi-government agency called the Pension Benefit Guarantee Corporation.<\/p>\n \u201cThat\u2019s a lifetime benefit that you can count on,\u201d Friedman said.<\/p>\n 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.<\/p>\n The 401(k)s have become the dominant retirement savings plans in the U.S. \u2014 an outcome some of its early proponents have come to regret<\/a> \u2014 and can be riskier for employees, who must calculate how much money to contribute, where to invest, and how to make it \u201clast for your lifetime,\u201d Friedman said.<\/p>\n Friedman said Intermountain\u2019s change could \u201cthrow a wrench\u201d into the retirement plans of older employees who are nearing retirement.<\/p>\n 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%. <\/p>\n While Intermountain\u2019s 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% matc<\/a>h.<\/p>\n According to Intermountain, 97% of healthcare organizations have already switched to 401(k) plans \u2014 a move it said \u201csignals that maintaining traditional pensions has become financially unsustainable.\u201d<\/p>\n \u201cLike other healthcare organizations,\u201d the statement read, \u201cIntermountain Health has faced increasing financial pressures, including reduced government payments, inflation, and significant market volatility.\u201d<\/p>\n Friedman said that Intermountain Health\u2019s 401(k) offer is good, but \u201cit is unlikely to be as good as the former plan.\u201d<\/p>\n She also was concerned that Intermountain could reduce or end it at any time.<\/p>\n 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. <\/p>\n Intermountain said a combination of reduced government payments, inflation and market volatility influenced its decision to stop pension contributions. <\/p>\n The healthcare system added that the \u201cfreeze is not the result of the merger with legacy SCL Health or the actions of any group of caregivers.\u201d Intermountain merged with the Colorado-based SCL Health in 2022<\/a>.<\/p>\n Intermountain\u2019s move away from pension plans is part of a larger trend that makes Friedman worried about future retirees\u2019 livelihoods, given possible cuts to Social Security<\/a> payments and statistics showing that around half of the private workforce doesn\u2019t have retirement benefits<\/a> to supplement Social Security.<\/p>\n As Americans grapple with higher costs, they are feeling \u201ctension\u201d between saving for retirement, paying off debts or attaining milestones like homeownership, said<\/a> Dan Doonan, executive director of the National Institute on Retirement Security.<\/p>\n