Erlanger Health System officials are taking the next steps to phase out the hospital's pension plan and shift employees into a new retirement savings plan.
The public hospital board's budget and finance committee voted Monday to freeze the defined benefits plan this summer, and move all employees into a "modernized" retirement savings plan similar to a 401(k).
The resolution still has to go before Erlanger's full board, which will meet Thursday.
Approximately 2,500 of the hospital's 4,000 active employees currently participate in the pension plan. Erlanger spends about $13 million annually in contributing to its pension plan, said Gregg Gentry, the hospital's Chief Administrative Officer.
The hospital - which is trying to recover financially from several years in the red - could save $44 million from the change over the next decade, Gentry said.
Erlanger CEO Kevin Spiegel has said Erlanger is one of a very small percentage of hospitals which still use a traditional pension plan, and that to continue to fund it as would be "unsafe for the long-term."
"It is a decision that by its nature is difficult, but the reality is it is overdue," Spiegel said in an interview Monday.
Spiegel has stressed that despite the freeze, employees existing plans would not be reduced or dismantled and employees will still have access to it once they retire.
Instead, as of this summer, employees would effectively have two retirement savings plans.
An employee's existing pension plan account will remain intact as it stands June 21. And the hospital would begin to contribute up to 5 percent of an employee's income toward a 403(b) plan - which is like a 401(k) retirement plan but for employees of certain tax-exempt organizations.
An additional 2.5 percent subsidy to employees closer to retirement - who have served 10 years of pension service at the hospital, and whose total pension service plus age equals 75.
For more information, read Tuesday's Times Free Press.