hero-image-1.jpg

NAPA: Health Care Organizations Ponder Retirement Plan Changes to Withstand Crisis

May 18, 2020

The National Association of Plan Advisors published an article on the recent NEPC Healthcare Flash Poll.

A large percentage of health care organizations are considering retirement plan contribution changes as part of an effort with weather the COVID-19 pandemic.

A recent flash poll of 51 health care organizations examined the business impact and steps they are taking to battle the pandemic finds that 43% of these organizations indicated they have already, or plan to, suspend or postpone retirement plan contributions. The poll, by the NEPC consulting firm, found that only 28% of larger organizations (greater than $2 billion in assets) have taken this step, while the majority (63%) of those organizations with a credit rating of BBB or lower indicated this was part of their strategy.

Reducing employee compensation was also an “oft-cited action” in an effort to limit costs, according to NEPC. It appears that organizations which have had more access to credit have been able to limit these cost-cutting actions to a greater degree, the findings show.  

Additionally, a majority of organizations (61%) indicated they have already furloughed staff or plan to do so. Organizations with investment portfolios of $2 billion or greater and/or a credit rating of AA have been less likely to include furloughs as part of their strategy, with about a third having implemented this action. Additionally, 96% of respondents indicate that they plan to receive additional funds related to the CARES Act.

Regarding operational impact, a majority (56%) of respondents have seen their daily burn rates increase by up to 25%, while 23% of respondents indicated a daily burn increase of more than 25%. Health care organizations on the east coast were more likely to have seen a steeper increase of more than 25%, with 28% of these organizations indicating so, versus only 8% of those on the west coast.

Meanwhile, following the drawdown in capital markets during the first quarter, a large majority of respondents (71%) have rebalanced back toward equities and credit assets, and/or had plans in place to do so. Larger systems (over $2 billion) and more highly rated (AA) organizations appear to have had greater flexibility to reallocate/consider reallocating into risk assets versus peers, NEPC notes.

“Healthcare organizations have recently undertaken drastic measures to combat this unprecedented environment,” says David Moore, Partner and Practice Leader for NEPC’s Healthcare Practice Group. “While it seems healthcare organizations have various avenues of support—78% have or will access lines of credit and 96% anticipate additional government assistance—it’s also clear there is a continued need to evaluate different strategies to keep them well-positioned going forward.”

The online survey was conducted in April 2020 with sourced responses from a diverse set of health care organizations around the country. 

Topics: Press, Press Coverage

Read our disclaimers.