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Analysis

S&P Expects Lower Funded Ratios for Nonprofit Healthcare Pension Plans in FY 2020

By Jack O'Brien  
   June 25, 2020

The ratings agency found that the median funded status of defined benefit plans fell from 84% in fiscal year 2019 to 83% in fiscal year 2020.

S&P Global Ratings stated in a report Thursday afternoon that overall nonprofit healthcare pension funded ratios are stable, but the ratings agency expects "lower funded ratios" in fiscal year (FY) 2020.

The ratings agency found that the median funded status of defined benefit plans fell from 84% in FY 2019 to 83% in FY 2020 due to a lower bond rate. S&P stated that this slight dip does not represent "a fundamental deterioration to funding status levels."

Citing the ongoing coronavirus disease 2019 (COVID-19) outbreak and the ensuing economic downturn, S&P expects lower funded ratios in FY 2020 that will lead to "higher contributions rates from plan sponsors, which could pressure budgets, and cause some entities to seek relief through deferral of pension obligations."

Related: 'Why is There Nothing Left?' Pension Funds Failing at Catholic Hospitals

"Most providers have made adequate contributions to their pension plans, and we expect overall pension costs to be somewhat lower and manageable for most issuers," the report stated. "However, for some providers, the combination of lower funded ratios and lower bond rates will result in increased costs, causing budgetary pressure as well as potential liquidity pressure. In some instances, providers may look for budgetary relief in pension contributions, through direct contribution deferrals or weakening of amortization methodologies."

S&P released a report last July that found the median funded status of defined benefit pension plans for nonprofit healthcare organizations in FY 2018 was 85%, increasing nearly 5% due to a higher bond rate.

Related: Nonprofit Provider Pensions Remain Solidly Funded

In addition to its analysis regarding the pension funded ratios for nonprofit healthcare organizations, S&P detailed the highest funded and lowest funded pension plans across the country.

10 highest funded pension plans (by % funded status)

  1. Columbus Regional Healthcare System, North Carolina, 128.6%
  2. El Camino Hospital, California, 119.4%
  3. Nash UNC Health Care Systems & Subs, North Carolina, 114.6%
  4. Health Care Authority for Baptist Health, Alabama, 112.9%
  5. Northwestern Memorial HealthCare, Illinois, 107.7%
  6. MultiCare Health System, Washington, 107.1%
  7. South Shore Hospital, Massachusetts, 104.3%
  8. Grand View Hospital, Pennsylvania, 104.1%
  9. North Broward Hospital District, Florida, 103.6%
  10. University of Florida Health Shands Teaching Hospital & Clinics, Florida, 102.8%

Related: Cost of Dismissing Cook County Hospital CEO? More Than $600,000, Plus a Big Pension.

10 lowest funded pension plans (by % funded status)

  1. Providence St. Joseph Health, Washington, 60.8%
  2. Carilion Clinic and Subsidiaries, Virginia, 61.4%
  3. NYU Langone Hospitals, New York, 63.6%
  4. Kaiser Foundation Hospitals, California, 65.4%
  5. Johns Hopkins Health System, Maryland, 67.4%
  6. Beth Israel Lahey Health, Massachusetts, 67.8%
  7. University of Pennsylvania Health System, Pennsylvania, 70.3%
  8. CommonSpirit Health, Illinois, 72.4%
  9. Partners Healthcare System, Massachusetts, 78.3%
  10. BJC HealthCare, Missouri, 80.3%

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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