In an e-mail to employees Wednesday, Memorial Health System's leaders laid out the retirement plan they hope to implement if the city-owned hospital is eventually spun off as an independent nonprofit and leaves the state's Public Employees Retirement Association.
The plan is a defined-contribution system, similar to a 401k, rather than a defined-benefit pension, like PERA. The core of the plan puts a percentage of each employees' salary into a retirement account. That percentage is based on the employee's age plus his or her years of service with Memorial. It begins at 2 percent, for a combined age-plus-years of service between zero and 30, and gradually climbs to 7 percent, for employees with a combined 70-plus age and years of service.
In addition, Memorial would match 50-percent of employees' contributions up to 6 percent of their salaries - offering an additional 3 percent.
Employees vested in PERA would keep those accounts, although they wouldn't earn additional contributions or years of service in the plan, said Cari Davis, Memorial's director of communications. Employees not vested would keep their own contributions to the plan, but lose the employer match.
"If you're vested in PERA, any contributions you've made and any contributions Memorial has made on your behalf are yours, they don't disappear," Davis said.
The plan is purely hypothetical at this point, since Memorial remains city-owned and part of PERA. On Monday, the City Council postponed a plan to change the hospital into an independent nonprofit that was being considered for the April election after PERA told the city it would cost $246 million for Memorial to leave the system.
Memorial CEO Dr. Larry McEvoy said that a new independent nonprofit could not possibly pay that bill in a lump sum. He said the hospital was conducting its own actuarial analysis of its PERA liability and would look at other ways of tackling the PERA problem, such as keeping current employees in the system or paying the tab off over a number of years.
Davis said employees deserved to know what Memorial's leadership was proposing as a PERA replacement, even if that replacement isn't imminent.
"Employees have been asking lots of questions about how their retirement would be affected if they made this conversion," Davis said.
She said Memorial would bring in actuarial specialists in the next few weeks to help employees understand how their benefits under the new plan would compare to what they would have earned under PERA.
"It was certainly the board and senior leaderships' intent to make this a very attractive and comparable plan," she said.
If the proposed plan is put into place, Memorial will contract with a benefits administrator to provide employees with investment options such as mutual funds.
Memorial Health System proposed retirement plan contribution percentages:
Employee's age plus years of service with Memorial --- % of annual base salary that Memorial will contribute to employee’s retirement
0 to 30 - 2%
30 to 40 - 3%
40 to 50 - 4%
50 to 60 - 5%
60 to 70 - 6%
70+ - 7%
Memorial would also match 50 cents on every dollar an employee contributes, up to 6 percent (meaning up to an additional 3 percent match)