The road to retirement just took a curve for Erlanger employees.
Erlanger’s board of trustees voted unanimously Thursday to freeze all existing employee pension plans, and move employees over to a new savings plan similar to a 401(k).
In a presentation to the board before the vote, the hospital’s chief administrative officer Gregg Gentry said Erlanger was on the “tail-end” of a trend where such retirement funds are being phased out.
“Corporate America was doing this 25 years ago, and the health care community started doing it in the last 10 to 20 years,” he said. “If you look at similarly-situated public hospitals, only 15 percent still have a traditional pension plan.”
Roughly 2,500 of the hospital’s 4,000 employees participate in the pension plan, and Erlanger spends about $13 million annually in contributing to it.
The public hospital could save $44 million from the change over the next decade, said Gentry, who called it a vital element of “transitioning from a financially unhealthy institution to a healthy one.”
The existing plans will not be modified from where they stand June 21, when the freeze takes effect. Employees will have full access to the funds once they retire.
With the new 403(b) plan, the hospital will provide a baseline contribution of an employee’s income, and will add up to 5 percent depending on what each employee chooses to kick it.
The new plan also seeks to boost approximately 200 employees who are closer to retirement and will have less time to build savings.
A 2.5 percent subsidy will be given to employees who have served 10 years of pension service at the hospital, and whose total pension service plus age equals 75.
Erlanger CEO Kevin Spiegel said he began notifying employees of potential changes to the pension plan last summer.
No employees spoke at the meeting in opposition to the change.
“It’s a very tough issue, it’s a very sensitive issue,” said board Chairman Donnie Hutcherson. “But I feel like you have been open and honest about it.”
Contact staff writer Kate Harrison at email@example.com or 423-757-6673.