A new report from Standard & Poor’s questions whether the Worker, Retiree, and Employer Recovery Act of 2008--an emergency relief measure signed by President Bush on Dec. 23, 2008, to ease some of the mandates of the Pension Protection Act of 2006--will be adequate to solve long-term funding shortages in the pension plans of some not-for-profit hospitals and health systems.
The report notes that the relief measure does not eliminate funding obligations but adjusts payment schedules to mitigate the effects of the recession. This postpones, but does not resolve, the problem of underfunded pension plans.
Standard & Poor’s studied a sample of 24 rated hospitals and health systems with traditional defined-benefit plans. It found that rising discount rates helped produce a relatively benign year for plans in 2008, but it expects overall funding of plans to decline in 2009 as weak investment markets lower the value of plan assets. As asset values fall, funding shortfalls will rise. Some hospitals will likely struggle to make higher contributions because of soft operating results and liquidity declines that began in 2008.
The report is available at www.standardandpoors.com/ratingsdirect (subscription required).
