The agency — which examined the median funded status of nonprofit hospitals’ pension plans in a report published July 11 — attributed the stable position to a fiscal year 2018 increase in the bond discount rate that measures pension liabilities.
“In the near term, we believe a higher funded status should mean lower statutory minimum contributions to defined benefit pension plans, which could help overall financial profiles because operating performance in the healthcare sector remains under stress,” S&P Credit Analyst Anne Cosgrove said in a news release.
S&P said it projects funding levels of nonprofit hospitals’ pensions will continue to shift, due to varying annual bond rates and uncertainty in investment markets.
But “most providers are making adequate contributions to their pension plans, and we expect overall pension costs to be somewhat lower and manageable for most issuers,” the agency said. “In addition, a number of providers are moving to defined contribution plans ,and in general, are finding ways to de-risk their pensions.”
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