SVHC plans change from fixed-benefit pension plan | Local News | #retirement | #elderly | #seniors
BENNINGTON — A notice about pension plan changes for current and former employees of Southwestern Vermont Health Care has concerned some who received the letter in early June.
“My only concern is that while SVHC is trying to maintain its financial health for the future that we also ensure that those that have shared in that goal are not forgotten by shedding a little light on this proposed benefit termination,” said one person who contacted the Banner.
Sharing the notice with the newspaper “was only done to shed some light on the matter, as not all participants may have read all their mail and the notices were not sent by certified mail to ensure delivery,” the person said.
Some of the terminology in the notice, which is required by the federal Internal Revenue Service, might have concerned some participants, said SVHC’s Chief Financial Officer Steve Majetich in a phone interview.
The June 1 notice, which was sent to approximately 950 participants is titled “Termination of the Southwestern Vermont Health Care Pension Plan” – referring to a defined-benefit plan that SVHC proposes to terminate by July 31, according to the cover letter.
That and similar wording may have sparked some concern among participants, said Majetich, who is the plan’s administrator.
However, he said the change will not result in loss of pension benefits, but will instead offer the participants greater flexibility and additional options for planning for their retirement years.
“Currently, there is no flexibility,” Majetich said.
One option for participants will be to continue to receive a fixed amount each month, as under the current pension plan.
According to the notice letter, “The plan termination process allows greater flexibility for plan participants with respect to benefits payable from the plan. The value of your benefit will not be affected by the termination of the plan.”
New options going forward will include taking the pension value in a cash payout or moving that into a retirement investment account, such as a 401(k) or IRA account.
“This is a good thing,” Majetich said. “It’s good for the hospital and for the employees.”
SVHC will benefit, he said, in that the health care corporation now manages and insures the fixed benefit plan, which is costly, but that work will eventually shift to a selected AAA-rated management firm and the plan will remain insured.
“We are a dinosaur,” Majetich said of the fixed-benefit plan.
Such plans once were common, but in most cases have been replaced by 401(k) plans or similar retirement programs that allow the employee to choose how much to invest while offering a range of investment options and possible additional contributions from the employer.
SVHC’s fixed-benefit plan continues but it was “frozen” in 2009, Majetich said, meaning that no new employees could enter the system.
Newly hired employees have since been offered a 403(b) plan, which is similar to a 401(k) plan but for health care, education and other nonprofit organizations.
Those plans allow pre-tax deductions from the employee’s paycheck and usually offer investment in a range of investments, from stocks to bonds to secure savings accounts.
The SVHC fixed-benefit pension plan also is expected to be 100 percent funded in terms of anticipated future benefits by the end of the fiscal year, June 30, Majetich said.
At least two more required notice letters will be sent out to the participants, providing more information, eventually to include each person’s particular dollar amounts for the different options.
Majetich said the changes, which were approved by the SVHC board of trustees, are anticipated by the end of the year or early in 2022.
If employees or former employees have questions about the changes, they are encouraged in the notice letter to call Angell Pension Group Service Bureau, which was retained by SVHC to assist in the services necessary for termination of a pension plan.
Majetich said participants also can call the SVHC human resources department with questions and many have. He said he also has talked with a number of participants about the proposed changes and believes any concerns were addressed.