Key Points
- Pension freezes are reappearing across private employers, shifting retirement responsibility from institutions to workers.
- Workers can try to replace much of the lost value by maximizing tax-advantaged accounts such as 401(k)s, IRAs, and Health Savings Accounts (HSAs).
- Early planning matters most. The earlier workers redirect contributions into replacement savings vehicles, the more they can offset the disappearance of guaranteed pension income.
For much of the 20th century, pensions formed the backbone of retirement security for millions of Americans. These "defined benefit plans" promised workers a guaranteed monthly payment in retirement, calculated from years of service and salary history.
That model has been shrinking for decades. Now, a new wave of pension freezes suggests the trend may be accelerating again.
One recent example comes from Intermountain Health, a major nonprofit health system serving several western states. The organization announced plans to freeze its pension plan for many employees, a move that reflects a broader shift across healthcare and other sectors once known for stable retirement benefits.
For workers who expected a guaranteed pension payment decades from now, the change can feel like a major financial setback.
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Why Pension Freezes Are Returning
A pension freeze means employees stop earning additional benefits under a defined benefit plan, though previously accrued benefits typically remain intact.
Employers freeze pensions for several reasons. The biggest factor is cost.
Defined benefit pensions require employers to guarantee lifetime payments regardless of market performance. With longer life expectancies and volatile markets, maintaining those guarantees has become increasingly expensive. Retirement plans are often one of the largest long-term liabilities on a balance sheet.
That reality has pushed many employers toward defined contribution plans such as 401(k)s. These plans shift investment responsibility from employers to employees.
The trend is already visible in national data. According to the Bureau of Labor Statistics, only about 15% of private-sector workers now have access to traditional pensions, while more than two-thirds have access to defined contribution plans.
The shift reflects a broader transition in the U.S. retirement system: from guaranteed income to self-directed savings.
What The Intermountain Health Case Shows
Intermountain Health employs tens of thousands of healthcare workers across several states, including nurses, clinicians, and administrative staff.
Like many large hospital systems, it historically offered pension benefits as part of a competitive compensation package designed to attract long-term employees.
Freezing a pension does not erase benefits workers have already earned. Instead, it stops the growth of future pension credits.
For example, a nurse who worked for ten years before a freeze would still receive a pension based on those ten years of service. But additional years worked after the freeze would no longer increase that pension payment.
In most cases, employers introduce or expand defined contribution plans at the same time, often increasing matching contributions to a 401(k) plan or 403(b) plan.
That approach shifts the long-term investment risk to workers but gives them greater control over how their retirement savings are invested.
The key challenge for employees is replacing the value of the pension income they expected.
Replacing Pensions With 401ks
The most direct way to compensate for a frozen pension is to increase contributions to a workplace retirement plan. For most healthcare and public-sector employees, that means a 401(k) or 403(b).
Financial planners often recommend saving 10 percent to 15 percent of income toward retirement, including employer matches. Workers who lose pension growth may need to aim for the higher end of that range or beyond.
Employer matching contributions can play a major role.
If a health system matches 50 cents for every dollar contributed up to a certain percentage of salary, failing to contribute enough to capture the full match effectively leaves compensation on the table.
Automatic payroll contributions also help replicate the steady accumulation that pensions once provided. Instead of relying on a guaranteed formula, workers create their own retirement income stream through consistent investing.
Over time, compound growth can offset much of the pension value that disappears after a freeze.
What Workers Should Do now
A pension freeze can feel like a sudden loss of financial security. Yet the impact depends largely on how quickly workers adjust their retirement strategy.
Several steps can help replace the value of lost pension growth.
1. Calculate the pension benefit already earned. Understanding the value of accrued benefits provides a baseline for retirement planning.
2. Increase retirement contributions. Workers should consider raising contributions to their 401(k) or 403(b), especially if their employer offers matching funds.
3. Add IRA savings if possible. An IRA can supplement workplace plans and provide additional tax advantages.
4. Consider using HSAs as retirement accounts. Allowing HSA balances to grow can help offset healthcare costs later in life.
5. Revisit retirement projections. Online retirement calculators or financial planning tools can estimate whether current savings levels will replace enough income in retirement.
Healthcare and public-sector workers may also want to review other benefits such as Social Security eligibility, deferred compensation plans, and supplemental retirement programs offered by their employer.
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Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
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