For the fifth time, Google Inc. — with its nap pods, gourmet cafeterias and philanthropic initiatives—has landed at the top of Fortune Magazine’s annual ranking of the best companies to work for.
But further down the list, one employer made a big debut in part by offering a more traditional yet rapidly vanishing perk: a fully-funded traditional pension plan.
That benefit helped WellStar Health System, Inc., a non-profit hospital operator based in Marietta, Ga., enter the list this year for the first time at No. 39. Other factors contributing to its inclusion were multiple flex-time options and a free concierge service that handles oil changes, grocery shopping and other errands for its 13,200 workers.
With its defined-benefit retirement plan, WellStar is bucking an inexorable trend.
The number of employers offering such plans has been shrinking steadily for decades, primarily in the private sector. More than 112,000 plans existed in 1985, according to the U.S. Pension Benefit Guaranty Corp, a government agency that oversees pension plans. By 2011, that figure had fallen to 25,607. Data from the Employee Benefit Research Institute, a non-profit think tank, tells a similar story: in 1979, 38% of private-sector workers participated in a traditional pension plan, compared with just 14% in 2011. At the same time, the number of workers participating in riskier defined-contribution plans has risen from 17% to 42%.
WellStar, which was founded 21 years ago, offers a pension to any employee—full-time, part-time, or those who work on an as-needed basis—who has worked at least 1,000 hours per year for five years. The pension is fully funded by the company; workers do not contribute any of their earnings toward it. Workers can also participate in a defined-contribution 403(b) plan, similar to a 401(k) plan but designed for non-profit employees. In these much more common plans, workers invest their own income, sometimes with a partial employer match, and withdraw the proceeds after retirement.
As in other pension plans, WellStar’s payments to retired workers vary based on salary and years of service. In the organization’s own scenarios, a 65-year-old retiree who had been with WellStar for 25 years might receive $1,396 per month; another, working at a higher salary and for 35 years, might get a check for $3,521.
WellStar’s pension commitment has become more expensive in recent years. From fiscal 2001 to 2011, the average annual payment into the fund was about $17 million, said David Anderson, WellStar’s executive vice president of human resources. In fiscal 2012, because of low discount rates (a hypothetical interest rate used to calculate pension obligations), the contribution soared to $50 million, prompting the board and leadership to consider ending the pension program, Anderson said.
But the company—led by CEO Reynold Jennings, who joined in 2011—opted to maintain the plan. (This year, costs are estimated to be about $24 million.) They were influenced by a 2012 report from human-resources consultancy Towers Watson about retirement benefits and their effect on employee attraction and retention.
Towers Watson found that younger people, who had previously expressed a preference for defined-contribution plans like 401(k)s, had been shaken by the financial crisis and increasingly wanted the security of a pension. About 80% of workers who were offered a pension plan said they wanted to stay with their employer until retirement, versus 57% of those who were only offered a defined-contribution plan.
“We’ve structured our benefit programs around being able to attract and retain top talent,” said Anderson. “The defined-contribution and defined-benefit plans have been important elements of our overall benefit program.”
Source: The Wall Street Journal