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D-H Plans to ‘Freeze’ Pensions

Lebanon — Dartmouth-Hitchcock will no longer be funding a traditional pension after 2017 and instead will shift employees onto a different retirement program, changes that are aimed at saving millions of dollars as the organization adjusts to new realities in health care.

Nearly half of the 7,900 people who participate in Dartmouth-Hitchcock’s retirement program could be affected, CEO and president Jim Weinstein said in an email to employees yesterday morning.

Commonly known as a “pension freeze,” the change does not mean that employees will lose the money they’ve accumulated towards their pensions to date. Rather, they will keep earning pension benefits until Dec. 31, 2017. But after that, employees will automatically be shifted into a “defined contribution plan,” which has been the only option offered to people hired since Feb. 9, 2006. Employees who stop working before 2018 will not be affected.

The reason for these changes is to save money, Weinstein said. Finances are stable right now, but the ups and downs of the financial market have become difficult to manage, he said. Even more, they come at a time when federal and state reimbursements for hospitals are being cut, and Dartmouth-Hitchcock needs to reduce costs as part of a longer-term strategy to create a sustainable health care system, Weinstein said.

“(Pension costs) have been on our radar screen,” Weinstein said in a telephone interview yesterday. “With everything happening at the federal level and at the state level in New Hampshire, we don’t have a lot of breathing room.”

Defined contribution plans are different from traditional pension plans, in which employers typically fund the entire pension plan and bear the investment risks on behalf of the employee, as has been the case with Dartmouth-Hitchcock. With defined contribution plans, employees contribute a portion of their paycheck in addition to a contribution from the employer. But more importantly, the risk of managing the plan shifts to the employee.

In a sense, Dartmouth-Hitchcock is adopting what is now common practice among both large and small for-profit and nonprofit employers, where traditional pension plans have given way to 401K, 403(b) and other plans whereby employees are responsible for managing their retirement funds. Sister institution Dartmouth College several years ago moved away from offering a traditional pension for new employees in favor of a defined contribution plan.

The savings to Dartmouth-Hitchcock are expected to be around $6 to $8 million annually, said spokesman Rick Adams. But more than that, hospital officials believe that moving everyone onto defined contribution plans will be a more reliable, stable investment than the pension program, he said. Dartmouth-Hitchcock has a $960 million defined benefit plan obligation, according to Weinstein’s email.

The pension freeze could affect as many as 3,700 people around the organization.

Dartmouth-Hitchcock employs about 8,450 people system-wide, including Mary Hitchcock Memorial Hospital in Lebanon, the Geisel School of Medicine at Dartmouth, the Veterans Affairs Medical Center in White River Junction, the Dartmouth-Hitchcock Clinic and community group practices in Keene, Concord, Nashua, Manchester and Bennington, Vt.

Employees at the VA and Geisel School of Medicine fall under different retirement programs and went unaffected.

One Dartmouth-Hitchcock nurse who’d been there 20 years said yesterday’s announcement came as a blow, particularly to veteran employees like herself. Many felt as though they were getting pushed out for younger, less expensive workers.

“Basically, they’re telling the old people we can’t afford you, you gotta go,” said the nurse, who spoke only on condition of anonymity because of fears of retribution.

Weinstein said he understood such concerns, but said these changes were necessary in order to move Dartmouth-Hitchcock into a different era for health care.

“There are no differences in how we value employees,” he said. “I’m disappointed if people don’t feel that way, but I understand it. We’re trying to create a different system.”

More information will be mailed to Dartmouth-Hitchcock employees in the coming days.

The change in retirement plans is just one of many adjustments that the Twin States’ largest health care provider is having to make. In March, Dartmouth-Hitchcock announced it was slowing hiring in response to the federal spending cuts known as sequestration. Dartmouth-Hitchcock is expecting to take a $6.3 million hit from sequestration, annually, to its $1.3 billion budget.

More changes are certain to come and they won’t just be about short-term cost cutting, Weinstein said. Dartmouth-Hitchcock needs to find a new way of delivering care and, in doing so, it will look at consolidating resources with other health care providers, adjusting to new payment models and shifting the thinking in health care to focus on keeping people well and out of the hospital rather than treating them only when they are sick.

“We need to prepare this organization for the future as we imagine it to be,” he said.

Chris Fleisher can be reached at 603-727-3229 or cfleisher@vnews.com

CLARIFICATION

This article has been amended for clarification. The following clarification appeared in the Friday, May 17 edition of the Valley News.

Dartmouth-Hitchcock's change in the pension program will apply to employees at Mary Hitchcock Memorial Hospital in Lebanon, the Dartmouth-Hitchcock Clinic and community group practices in Keene, Concord, Nashua and Manchester. A story in yesterday's edition was unclear on that point.