Intermountain Health Freezes Pension Plan

• Intermountain Health plans to freeze its long-standing pension plan.
• This change will impact about one-third of its more than 68,000 employees.
• Factors influencing this decision include fiscal pressures, reduced government spending, and inflation.

Intermountain Health, based in Utah, recently revealed its decision to end its long-running pension system. This step places the health services giant among the many U.S. companies that have moved away from pensions towards contributory retirement plans over recent decades.

The organization pointed to “ongoing fiscal pressures, including reduced government spending, inflation, and significant market volatility” as reasons behind its board’s decision to freeze the plan.

According to Intermountain’s announcement, “This decision was made after careful evaluation and supports both the long-term stability of Intermountain and the retirement security of our current and former caregivers.”

In an email exchange with the Deseret News, Intermountain shared that its pension plan dates back to the company’s inception in 1975. Though they began offering both a 401(k) and a pension plan in the early 1990s, the pension option for new hires ended in 2020. Now, only about one-third of the company’s 68,000 employees across six Western states are eligible for pension benefits.

A Doctor’s Perspective

An Intermountain doctor, who preferred to remain anonymous, expressed to the Deseret News that none of the workers eligible for a pension, including those in managerial roles, seemed content with this decision. They felt uncertain about their next steps.

This doctor pointed out that tens of thousands of employees will feel the repercussions of this change, potentially costing individuals hundreds of thousands of dollars in future income. They also emphasized that pension benefits had been “highly advertised and promised” during previous hiring campaigns at Intermountain.

In response to concerns, Intermountain stated that all pension benefits earned by eligible employees until the end of the year will be preserved, and those funds will accrue interest until disbursed.

The company reassured that “pension benefits received by employees prior to the freeze date (December 31, 2026) will be maintained,” meaning previously vested benefits won’t be lost. These benefits are said to be legally protected under federal law, secured in a trust specifically for future pension payouts to caregivers.

Intermountain mentioned that almost all U.S. health care providers—about 97%—now offer only 401(k) plans, and that the freeze on its pension was “the result of a long and careful consideration of all options” aimed at ensuring the best future for their caregivers and service providers.

The Decline of Pensions

Pension plans used to be a staple for American workers, ensuring that loyal employees could enjoy a secure retirement funded by their employers via monthly checks.

However, since the 1980s, many U.S. companies have started to phase out these defined benefit plans in an effort to cut costs. This shift was facilitated by the introduction of 401(k) plans in the 1978 Internal Revenue Code, allowing employees to invest pre-tax compensation.

David McEntire, a senior financial planner at Deseret Mutual Benefit Administrators, explained that the essential difference between defined benefit and defined contribution plans like 401(k)s lies in the shifting of both risk and costs to employees.

“With a defined benefit plan, the employer covers all contributions while employees hold all investment risk, anticipating a payout at retirement,” McIntyre said. “In a defined contribution scenario, most contributions come from the employee, sometimes supplemented by the employer, leaving the employee to navigate all investment risks.”

Though Intermountain did not disclose projected savings from the pension freeze, it indicated how it plans to redirect those funds.

Some of these resources will be allocated to alternative employee benefits, including a new automatic 2% retirement contribution to 401(k)s and a new Retirement Health Savings Account for those who were part of the pension plan. The remainder will support patient care.

McIntyre noted the portability of defined contribution plans, meaning employees can carry their plans with them if they switch jobs—a significant advantage over traditional pensions. He also stressed the importance of seeking professional financial advice amidst unexpected changes to retirement plans.

Intermountain’s 401(k) plan features matching contributions of up to 4% and provides various support services for those transitioning from pension plans. These include a range of financial planning webinars, one-on-one retirement counseling, and tools to assess benefits post-freeze, as well as other economic well-being resources.

As a nonprofit, Intermountain Health operates 33 hospitals and over 400 clinics across Utah, Idaho, Nevada, Colorado, Montana, and Wyoming.