NEW YORK--(BUSINESS WIRE)--Not-for-profit hospitals exhibited clear pension funding improvement in 2013, according to a new Fitch Ratings report.
'While median funding levels hovered around 70% from 2010-2012, funded status improved sharply in 2013 to 84% primarily due to strong investment returns and increase in discount rate,' said Jennifer Kim, Associate Director. 'Nearly 90% of providers achieved funding status of over 70% in fiscal 2013 compared with just 62% in 2011.'
Many providers have chosen to amend defined benefit plans, which allows for varying degrees of financial relief, with all providing immediate benefits with the exception of plan closures, which will realize improvements over a longer timeframe.
While the volatility of overall funded status can be managed to a degree, Fitch believes the amendments being executed will alleviate the possible swings in pension funding status due to changes to life expectancy, interest rates, and investment returns that are beyond management's control but have an impact on strategic and capital spending.
Due to the large asset bases and substantial liquidity levels available to fund defined benefit pension obligations for most of providers rated by Fitch, weak pension funding status to date has not resulted in ratings downgrades within Fitch's not-for-profit hospital and health system portfolio.
The full report, titled 'Trends in Not-for-Profit Hospital Pension Liabilities,' is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Trends in Not-for-Profit Hospital Pension Liabilities