Mercy cancels employees’ 401(k) plans, future of pension fund also uncertain
Mercy Iowa City's retired employees face uncertainty as the hospital transitions into the University of Iowa Health Care system.
The former Mercy Hospital officially became the University of Iowa Health Care Medical Center Downtown on Jan. 31. The university won rights to the 150-year-old hospital and its assets in a bankruptcy auction in November.
Court filings indicate that Mercy Hospital's five pension fund accounts held $119.5 million as of July 31, 2023.
The bankruptcy court appointed an official committee "to represent the interests of pensioners" in Mercy's auction. The committee has since appointed legal counsel and a financial advisor.
Seven Mercy pensioners founded the committee, giving members the ability "to hire counsel to protect their interests, to assist others similarly situated in filing claims in this case, and to communicate information about the filings and hearings in this case," according to documents filed in the U.S. Bankruptcy Court for the Northern District of Iowa.
Pensioners will receive payments as talks and negotiations continue and eligible "participants" can still apply for pension benefits as long as they meet the outlined requirements.
"The final treatment of pension claims in the bankruptcy case will be dealt with under a Chapter 11 plan of liquidation," a hospital spokesperson wrote in a statement provided to the Press-Citizen on Monday. "Talks are ongoing among the major constituents in the bankruptcy case (including the pension committee and its counsel) about the framework for such a Chapter 11 plan."
More: Regents approve bylaws, renaming of Mercy as University of Iowa Health Care transition nears
What a liquidation would look like under Chapter 11 bankruptcy is unclear. A spokesperson for the former Mercy Hospital did not respond to a request for additional information on Monday.
"The future of the Mercy Pension is of utmost importance to the pensioner's committee, and we are very encouraged by the trajectory of the case thus far," Paula Roby, the committee's attorney, said in a statement provided to the Press-Citizen.
Nearly 450 pensioners had requested updates from the then-named Pensioners Information Team as of mid-October 2023. The court approved the pensioner committee in November.
More: University of Iowa makes Mercy Hospital transition official with new downtown signage
Employees' 401(k) plan terminated
Mercy's 401(k) employee retirement plans have been terminated, according to one of the hospital's spokespersons.
The estate of Mercy Hospital does not owe money to the 401(k) plan.
Participants in the 401(k) plan are being notified about their distribution options. The Internal Revenue Service suggests that employers notify employees of termination in step two of a multi-step process.
In step six, the IRS says employers should distribute "plan assets" generally within 12 months of termination of the 401(k) plan.
More: Rising teen rapper Kay Killa's journey from high school talent show to The Englert
While not typical, businesses often terminate a 401(k) to establish a different retirement plan.
Ryan Hansen covers local government and crime for the Press-Citizen. He can be reached at rhansen@press-citizen.com or on X, formerly known as Twitter, @ryanhansen01.
This article originally appeared on Iowa City Press-Citizen: Mercy cancels 401(k) plans, pension fund's future uncertain
