Blue Mountain Health System officials say a frozen pension fund at Gnaden Huetten Memorial Hospital is underfunded by $16 million, and the amount is expected to climb substantially in 2017 if nothing is done now.

That's why the health system is looking to Carbon County for help to resolve this issue.On Thursday, the county commissioners voted to advertise a notice with regard to an ordinance authorizing and approving a project of the Carbon County Hospital Authority for the benefit of Gnaden Huetten Memorial Hospital. The county, once the action is finalized later this year, will act as the guarantor of a $20 million loan on behalf of Blue Mountain Health System.A guarantor acts as a co-signer of sorts, pledging their own assets as payment if the original borrower cannot perform their obligations for repayment of the loan.Carbon County has been a guarantor of loans for the hospital in the past, and currently holds a $7 million bond that will be fully paid off in the next three years.Before the mergerAndrew Harris, president and CEO of Blue Mountain Health System, said the action will help the hospital fully fund the frozen pension fund for the 600 Gnaden Huetten employees who were vested in this before the merger."Pension funds throughout the country have been underfunded by businesses for many years," Harris said. "Being underfunded does not mean the employees would not receive their money. They would still receive what they deserve. The problem would occur if the hospital would go under."Once the plan is fully funded, the hospital will close the fund. This action locks it at its current rate. Employees in this fund will then have two options, either opt into an annuity to receive payments from the pension fund once they retire, or take a cash payout so that they can invest that money on their own.Blue Mountain Health System has been putting $2 million annually into the fund as a required contribution since Gnaden Huetten and Palmerton hospitals merged in 2005 to become Blue Mountain Health System.At the time of the merger, Gnaden Huetten had a pension plan, which was frozen at $10 million underfunded. Employees were then transferred to a 403(b) retirement plan.Since then, that underfunded amount has jumped to its current balance, even with the annual payments by the hospital from its budget.Harris explained that a rocky stock market over the years, age tables developed by the IRS and retirees living longer than previous calculations for the fund have contributed to the expanding underfunded value."Originally, when these pension funds were developed, when someone retired at 65, you would expect them to enjoy retirement for 10 years on average, (age tables of the IRS stated)," Harris said, "Now we are living into our mid-80s, so pension funds need to be funded for 20 or 30 years. There just hasn't been enough money in our pension fund to fill those projected tables."We have gone from a pension fund that was $10 million underfunded to $16 million," he said. "We put in $20 million over the last 10 years and we're in a worse position today with funding the pension payment plan."Time to catch upAnother reason Blue Mountain Health System felt now was the right time to take out a loan to fund the plan is because beginning in 2017, the IRS is changing the age tables and actuaries are projecting that if the pension fund is not fully funded, it will escalate from $16 million to $25 million underfunded."If that happens, we will never be able to catch up," Harris said. "It has affected the cash flow of Blue Mountain Health System significantly because there is $2 million we are putting in each year to this fund that isn't really helping anything. It is taking cash away from us to buy capital, take care of our employees and do other things."The loan will help the hospital continue to care for the community by freeing up $2 million annually, while also caring for the retirees from Gnaden Huetten.The $20 million will be bundled into the old bond that the hospital has with the county and will have a repayment schedule over 15 years.Harris told the commissioners that the payment to debt service for the $20 million loan will actually be less than the $2 million annual contribution that the hospital is currently putting into the pension plan.Commissioners' Chairman Wayne Nothstein said the board gave this a lot of serious consideration and weighed all the options before making this decision."We looked at several things, what it would do to the hospital and it's a matter of economics, cost savings for the hospital, improving the services at the hospitals and protecting the employees that are in the retirement plan," he said. "We felt that it was just the right thing to do and we look forward to working with the hospital."Commissioner William O'Gurek echoed Nothstein's thoughts, saying that over the past few years, the county has seen the health system's financials on a quarterly basis so they know where the money is going."I am confident that the track Blue Mountain Health System is on is good, not only from the hospital standpoint, but for Carbon County," O'Gurek said. "This is the right thing to do to make things better for the future of the county."The action taken Thursday will now be advertised and then finalized later this year.