Northern Light Health, a 10-hospital system headquartered in Brewer, Maine, is ending pension benefits for about 6,000 employees, effective July 1, 2025, the health system confirmed to Becker's.
The health system is moving away from pensions to a 403(b) retirement plan, which allows employees to make contributions and an employer can offer a match percentage.
The 403(b) plan is a "more modern retirement vehicle" for employees and will reduce administrative costs for the health system in the long term, Paul Bolin, chief people officer for Northern Light Health, told Becker's.
The enhanced 403(b) match is part of a strategy to modernize benefits and align with employee expectations while addressing administrative inefficiencies and long-term cost savings. While cost savings are minimal in the near term, long-term benefits include avoiding $6 million in annual Pension Benefit Guaranty Corporation fees as the pension phases out over time.
"We will avoid the need to pay those premiums in many years to come, but there's very little savings this year," Mr. Bolin said. "It's really a part of a long-term strategy."
Late-career employees will not be affected by the change because they're too close to retirement to see any benefit from an enhanced 403(b), according to the health system. Early-career employees would see the highest returns with the new 403(b) and the change will be neutral for mid-career employees.
"All of the funds that are in employees' pensions now are not lost. They're all obtained with the employee, and they'll continue to appreciate over time before they retire," Mr. Bolin said. "It's just new contributions: Instead of toward the pension, the funding will go toward enhanced 403(b) match."
Northern Light Health said the move will improve its ability to attract new employees.
"We hear time and time again from applicants that they want to see more employer investment in the 403(b)," Mr. Bolin said. "Our recruitment has been very strong over the past year, surpassing national trends, and our retention is also strong. We think this will further enhance our ability to be an attractive employer for employees."
The move, which Mr. Bolin described as a "win-win" for employees and Northern Light Health, follows a string of cost reduction initiatives as the health system aims to bounce back from a $100 million annual loss, according to the Bangor Daily News.