Erlanger Health System's pension fund - which just over a year ago sat critically underfunded at 36% - is now more than 50% funded thanks to a strong year of earnings on investments, according to Erlanger board chair Jim Coleman.
Coleman shared the news during the public hospital's most recent board meeting, saying that Erlanger's increased contributions to the fund combined with a 21.8% portfolio return in the last fiscal year boosted the pension's funding level to 50.57%.
"So, great progress there," Coleman said.
On Sept. 24, 2020, the Erlanger Board of Trustees voted during a public meeting to immediately suspend lump-sum payments from the hospital's pension until it was brought to 80% funding.
Erlanger employees who are vested can still receive their pension benefit in monthly payments, but those who want it paid up front in one lump sum will have to wait until the pension reaches 80% funding, at which point that option will be restored.
During that September 2020 meeting, trustee Ken Conner said it could take roughly seven to 10 years - or more - to reach the 80% level given that the plan was 36% funded, or $83.5 million underfunded, at the end of the fiscal year 2020. But the now improved funding level could mean the option for employees to collect their benefits as a lump sum may come sooner than those original projections.
Participants have until age 72 to decide how to receive their funds, and they're locked in once they choose. Therefore, employees who are closest to retirement and wanted the lump sum option are most likely to miss out.
So far this year, the portfolio is showing a 9.3% return, Coleman said at the most recent board meeting.
Before the lump sum option was paused, about 85% of vested employees chose to receive their pension benefits as a lump sum rather than spread out in monthly payments, making it by far the preferred option. Many longtime workers said they mapped out their retirement plans based on having their lump sums and were blindsided when the option was suddenly stripped away.
Every other resolution presented that evening was listed on the meeting's agenda except for the one concerning the pension.
A group of Chattanooga attorneys representing several current and recently retired Erlanger employees investigated the legality of that decision. However, no legal action was taken against Erlanger over the pension changes.
Contact Elizabeth Fite at efite@timesfreepress.com or follow her on Twitter @ecfite.