Health and Hospital Systems Leveraging Defined Benefit (DB) Plans to Recruit and Retain Talent

Health and Hospital Systems Leveraging Defined Benefit (DB) Plans to Recruit and Retain Talent

Asset managers must tailor their approach for this subset of plans


December 2018, Boston. Global research and consulting firm, Cerulli Associates, finds that certain health and hospital systems employers struggle to attract and retain talent.

“While corporations are generally moving toward defined contribution (DC) plan offerings, health and hospital systems frequently use defined benefit (DB) plans as a recruiting tool, allowing for them to attract talent to more rural areas,” states James Tamposi, analyst at Cerulli. Compared with the broader corporate DB landscape, however, health and hospital system DB plans’ funded statuses are generally lower, so derisking and liability-driven investing is less common. Managers seeking corporate DB assets in this space should adjust their sales and marketing approaches accordingly.

The largest investment pools held by health and hospital systems generally include board-designated/long-term unrestricted pools, DC plans, and DB plans. Health and hospital organizations surveyed by Cerulli report frequent use of consultants for DB and DC plans, while they mostly (77%) oversee their short-term investment pools internally. Hospitals overseeing multiple investment pools frequently face challenges viewing their investment portfolios in aggregate; consultants can help these institutions look at their investment pools holistically and manage risk at the enterprise level.

“Asset managers looking to go directly to health and hospital institutions should target investment pools for which their products can add value. If an institution only maintains short-term investments and DC pools, an index manager may be a better fit to market its strategies to this clientele. For institutions that have endowment and foundation pools, or DB pools, active managers may have a better chance of attracting attention,” adds Tamposi.

Cerulli’s latest report, North American Institutional Markets 2018: Asset Owners and the New Regulatory Environment, provides insight into the increasingly multifaceted institutional landscape. The report explores insurance general accounts, public DB plans, single- and multi-employer corporate DB plans, foundations, endowments, and health and hospital systems.

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