The Intermountain Health Board of Trustees has announced a pension freeze effective December 31, 2026.
This change is not unique to Intermountain Health. Pensions are quickly becoming a thing of the past. In their earliest form, pensions date back to ancient times. The Roman Empire had one of the first pension systems. Military veterans were granted land or stipends after service to ensure loyalty and stability.
In the United States, pensions gained traction after the passage of Social Security Act of 1935. Private-sector pensions then expanded quickly after World War II, as large corporations used them to attract and retain employees in a growing industrial economy.
Why Pensions Have Been Declining
Pensions worked well at a time when people stayed with one employer for decades. Over the past 40 years or so, traditional pensions (defined benefit plans) have steadily declined. Here’s why:
- Rising Costs
People are living longer, which means companies must pay benefits for much longer than originally expected. Making pensions far more expensive. - Market Risk & Shift to 401(k)’s
Employers bear the investment risk. A significant market decline could threaten a company’s ability to pay out. Plans like 401(k)s shift responsibility from employer to employee, giving companies cost predictability while offering workers portability and control. An employee can be much more growth oriented in their own retirement account. A 401(k)’s job is to grow; a pension’s job is to not shrink. - Career Mobility
It’s much rarer to see an employee stay with one company for their whole career. Pensions reward tenure, which doesn’t align with modern career paths.
Monthly Benefit vs. Lump Sum
Intermountain Health is requiring some employees to either annuitize (turn on) their pension and begin taking monthly withdrawals or take it as a lump sum benefit.
Most people wonder: am I better off taking the guaranteed monthly benefit, or is the lump sum my best option? As is the answer with most financial questions: it depends!
The monthly benefit guarantees a fixed amount for the life of the employee and gives an option for a guaranteed monthly benefit for the employee’s spouse upon death as well. There are 8 different benefit options, and choosing the right one can be stressful. The “wrong” choice could mean the difference of hundreds of thousands of dollars over time.
Monthly Annuity
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Lump Sum Payment
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Projected Portfolio Growth Over 25 Years
The chart below shows how an $800,000 lump sum benefit (rolled to an IRA) could grow over 25 years under three different return scenarios, compared to the $4,000/month fixed annuity being reinvested upon each monthly deposit. This chart does not account for spending or required minimum distributions with the lump sum.
Bottom Line
Ultimately, the right choice depends on your health, life expectancy, other income sources, risk tolerance, and estate & family goals. There is no one-size-fits-all answer. With 8 benefit options available, the details matter enormously. A qualified financial advisor can help you navigate your specific situation before the December 31, 2026 freeze.
