“For many hospitals, material growth in unfunded pension liabilities has roots in low interest rates (which provided a low return on assets) and a change in mortality tables, increasing future pension obligations,” according to Moody’s.
Hospitals have several options to address growing pension burdens, including closing a pension plan to new employees, annuitizing the plan or offering lump-sum payouts.
Moody’s said hospitals exploring ways to mitigate rising pension liabilities is a credit positive trend that it expects to continue in 2017.
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