Many nurses and health professionals face retirement with inadequate pensions and retirement savings

It was bad enough when nurses at Burlington Memorial Hospital in Wisconsin were asked to take a cut in their pension as a part of regular contract negotiations. But then came the ultimate insult: a suggestion by management that the best way to get a better pension would be to marry well.

It didn’t take long for the nurses to issue a comeback. Days later, they donned wedding dresses and marched to Aurora Health Care, the hospital’s headquarters, to “propose” to millionaire hospital president G. Edwin Howe.

“Maybe Ed Howe with his $1.3 million pension can afford a cut, but the nurses cannot,” asserted Pam Mueller, president of the Burlington Memorial Federation of Nurses and Health Professionals. “All we are asking is for Aurora to leave our  pensions alone.”

Unwilling to stand by and let the hospital make a pension cut that would cost nurses and healthcare workers $2,000 a year, the union decided to inform the community with a series of billboards and radio ads urging support for fair pensions.

A pension cut would make it tough for workers to retire. “They will have to work longer to make up for the loss,” says Candice Owley, president, Wisconsin Federation of Nurses and Health Professionals. “Burlington workers have never broken their promise to provide high-quality patient care. They shouldn’t have to face sexist comments and demeaning contract offers. They just want to work hard and earn a decent living and have an affordable retirement.”

“We are long past the time when women depended on men and marriage for a financially secure future,” notes Owley. “Clearly, Aurora is living in the dark ages. Nurses today are willing to stand up and fight for their rights and their pensions.”

The remark tossed out during a bargaining session may have sparked outrage among the nurses and healthcare workers, but it also highlights a crisis: Many nurses and other healthcare professionals, like the ones at Burlington, are facing retirement with inadequate pensions and retirement savings.

“Most hospitals are privately owned or nonprofits that are run independently. Therefore, the pensions are not very good overall,” says John Abraham, deputy director of the AFT’s research department. As Abraham puts it, “No one goes into nursing for the pension.”

The problem is even more acute in the service and healthcare sectors, where women employees predominate. Women’s salaries and pensions are generally lower than men’s, and what’s more, women typically need more retirement income than men because they live longer and more often do so without a spouse.

Experts say that retirees need 75 percent of their preretirement income to live comfortably. To do that, retirees have traditionally relied on pension benefits, personal savings and Social Security. But these traditional resources are becoming more elusive by the day.

Pensions have been evolving for decades. The most pronounced change has been the shift from traditional pension benefits—or defined benefit plans, which offer guaranteed benefits for life—to defined contribution plans, also known as 401(k) or 403(b) plans. According to the U.S. Bureau of Labor Statistics, 57 percent of all workers receive some form of retirement benefit. Just over half, 51 percent, have defined contribution plans. These plans allow employees to invest in financial markets as they wish, with the option of taking their accounts with them when they leave a job. Defined contribution plans provide workers with much lower employer contributions, and often generate less retirement income.

Most union-negotiated pensions are defined benefit plans.

But this is not true in healthcare, says Abraham. Only 3 percent of healthcare employers offer defined benefit plans to their workers, according to a 2002 Watson Wyatt Worldwide survey of employers. Most hospitals, 65 percent, offer cash-balance plans, a hybrid of traditional plans and 401(k)s, the survey notes.

The future of Social Security remains unknown, but benefits have been declining gradually for a number of years. Recently, President Bush has pressured Congress to privatize Social Security by allowing workers to invest a portion of their money in the stock market. Although retirees, unions and other interested organizations have successfully prevented any changes to the program, the fight is expected to continue.

As for personal savings, over the summer, the national savings rate for Americans fell to zero. A decade ago, it stood around 4 percent. The declining savings rate raises concerns that most Americans are not setting aside enough money for even a meager retirement.

Recent trends indicate that the shortage of healthcare workers has prompted some hospitals to restructure their retirement plans to recruit and retain workers. However, pensions vary from hospital to hospital.

“There needs to be more research done to determine how to improve benefits,” says Abraham.

Fortunately, unions have begun using more creative ways to negotiate better plans for their members, says Abraham. For example, a local can negotiate for its members to receive extra credit for overtime. In this scenario, a hospital would allow overtime pay to be used in the calculation of an employee’s final average salary. Another option would be to increase the pension multiplier for every year a member remains on the job after age 55. One other alternative unions can negotiate is a deferred retirement option, or DROP, plan. Under a DROP plan, workers can remain employed beyond their normal retirement age and continue to earn a salary while accumulating a nest egg payable in a lump sum. Workers receive that lump sum in addition to their pension when they eventually retire.

Sooner or later, hospitals must recognize that if they are going to retain experienced and highly qualified professionals, they will have to come up with ways of motivating them to stay on the job longer, says Abraham.