In a sign of change sweeping the health care industry, Rex Healthcare in Raleigh has notified workers it is eliminating employee pensions.
The hospital system is instituting a “pension freeze” and will stop contributing to the pensions of about 2,800 employees who still have pensions. The organization is holding about 30 informational meetings this week to help Rex employees understand how the change will affect them.
In an email to employees, HR Vice President Sylvia Hackett said Rex’s contribution to the employee pension fund jumped from $13 million last fiscal year to $17.3 million this fiscal year.
“Due to this and other factors, Rex can no longer maintain the benefit,” Hackett told employees in her email Friday.
Pensions are a holdover from a time when generous employers could afford to finance retirements for their workforces, but as people are living longer and profit margins are shrinking, pensions are vanishing from the labor landscape.
WakeMed Health & Hospitals in Raleigh ended employee pensions in 2010.
Rex and WakeMed contribute to employees’ personal retirement savings plans and also partially match employee contributions to those plans.
Unlike some hospitals that are bleeding money, Rex’s operating income has been increasing in recent years.
In the 2013 fiscal year, Rex posted $56.5 million, up from $56 million in 2012. Previously, Rex reported $48.9 million in 2011, $35.8 million in 2010 and $20.5 million in 2009.
Rex has 5,600 employees, about half of whom have pensions.
Rex will stop contributing to employee pensions March 31 for the 2,800 employees who qualify for pensions. The amounts those employees have accrued to date will remain but will not grow in value, Hackett said in her email.
The nonprofit organization’s pension fund was valued at about $270 million as of June 30, 2014.
Those who started employment after Feb. 1, 2009 are not affected by the pension freeze; they do not receive pension benefits because Rex eliminated them for new hires six years ago.
About 800 Rex retirees and their beneficiaries are collecting pension benefits currently. An additional 1,800 former Rex employees have vested company pensions but are not collecting benefits because they haven’t retired yet.
Rex is owned by UNC Health Care, a university system whose employees are on the state retirement plan.