Merger of rivals creates retirement system superior to ones that it replaced

Five months after two rival health-services companies merged, they created a retirement system that put aside past cultural and operational differences so the new whole was greater than the sum of its former parts.

"It was always us vs. them," said Taft Simmons, corporate director for retirement plans at Ballad Health, Johnson City, Tenn., recalling the competition between Mountain States Health Alliance and Wellmont Health System. Employees at one company would go to the other — and sometimes back again.

"We were competitors for so long," Mr. Simmons added. "It was important to create a new culture."

The new company name was part of the new culture, as was the new company motto: "It's your story. We're listening."

The ballad of the Ballad Health Retirement Program is a story about how communication and education can lead to the whole becoming greater than the sum of its parts. Plan participation has risen to 64% vs. 55% prior to the July 1, launch of the program. Along the way, the retirement program, with aggregate assets of more than $800 million, consolidated multiple DC plans under one roof, selected a single record keeper, simplified the investment menu and, in some cases, offered less expensive mutual fund share classes.

Managing all the moving parts required addressing different corporate cultures and different retirement plan strategies in a health-care system that now covers 29 counties in northeast Tennessee, southwest Virginia, northwest North Carolina and southeast Kentucky.

The two health-services systems, Mountain States Health Alliance, Johnson City, Tenn., and Wellmont Health System, Kingsport, Tenn., merged on Feb. 1, 2018, giving plan executives five months to prepare for the new retirement system in time for the start of a new fiscal year. "We wanted to quickly start building the Ballad Health culture and one way to help facilitate that was to bring team members onto a common benefit and retirement structure," Mr. Simmons said.

Educating the more than 16,000 participants was a daunting task. Plan executives had to reach not only retirees but also employees in 21 hospitals, long-term-care facilities, an addiction treatment facility, retail pharmacies, outpatient service facilities, home care and hospice service businesses and a medical management corporation.

From mid-June to mid-August 2018, Ballad, its consultants and record keeper held 139 group meetings, 3,019 meetings with individual participants as well as 329 online appointments. Among participants taking one-on-one meetings, 40.5% raised their contribution rates.

This effort by Ballad and its record keeper, Lincoln Financial Group, earned first place in Pensions & Investments' recent Eddy Awards in the plan transitions category for not-for-profit/other employers with more than 5,000 employees.

"It was important not to hold onto the Mountain States way of thinking or the Wellmont way of thinking," Mr. Simmons said. "We were careful about messaging about Ballad. We didn't look back."

The new company name and the plan name were part of looking forward. "When researching the name, we talked to the communities," Mr. Simmons said. "We asked them what they wanted. They said they wanted health care from someone who listens."

Executives settled on the name Ballad because "a ballad is a song that tells a story," said Mr. Simmons, adding that the region is rich in storytelling. Nearby Jonesborough, Tenn., is home to the annual National Storytelling Festival and the International Storytelling Center, a Smithsonian Institution affiliate.

As for more practical matters, plan officials wanted to establish a single record keeper, settling on Lincoln Financial after conducting RFP interviews with VALIC (recently renamed AIG Retirement Services) and Transamerica Retirement Solutions.

Mountain States had used Lincoln Financial and Wellmont had used VALIC. In addition, Mountain States had acquired Laughlin Memorial Hospital, Greeneville, Tenn., in a separate transaction in July 2017. Its record keeper was Empower Retirement.

Mr. Simmons estimated that using a single record keeper saved an estimated $700,000 in administrative fees compared to the total costs incurred by Mountain States, Wellmont and Laughlin Memorial.

Ballad executives also set about simplifying investment choices for the many components in the merger. Laughlin had a 403(b) plan; Wellmont had a 401(k) plan, 403(b) plan, 401(a) plan and 457 plan; and Mountain States had two 401(k) plans, two 457 plans and a non-qualified deferred compensation plan.

After the consolidation, the Ballad Health Retirement Program has one 401(k) plan, one 403(b) plan, one 401(a) plan, two 457 plans and one non-qualified deferred compensation plan.

Previously, the Mountain States, Wellmont and Laughlin defined contribution plans had different investment lineups for mutual funds and stable value accounts. Ballad officials made investment adjustments so that now the various plans under the Ballad umbrella offer the same choices of 11 stock and bond funds, one target-date series managed by Vanguard Group and one stable value account for all participants. There's a mixture of actively managed and index funds, domestic and international stock funds and funds ranging from large cap to small/midcap.

"We wanted to simplify the lineup and not make it overwhelming," Mr. Simmons said. In a note to participants describing the new strategy, Ballad officials said the mapping of some investment options was "chosen because their investment approach and objectives are similar to those of your current investment options."

Mr. Simmons said communication campaigns differed owing to special circumstances. Most notably, the 403(b) plans at Wellmont and Laughlin Memorial incorporated annuity platforms as well as mutual fund platforms. Ballad officials emphasized to these participants that their annuity investments — which are individual contracts with insurance companies rather than mutual fund group contracts — would remain in force under the new system, Mr. Simmons said. Mountain States had relied solely on mutual funds.

Because Mountain States, Wellmont and Laughlin had offered different matching and/or company contribution schemes, Ballad officials decided to create a uniform matching program, Mr. Simmons said. Participants can receive a dollar match for every dollar contributed up to 6% of annual pay.

Even though the merger led to many changes, Ballad is still examining other plan enhancements, such as auto enrollment. "We'll look at it from year to year," Mr. Simmons said, adding that plan officials continue to emphasize the Ballad way vs. the Mountain States way or the Wellmont way. "The new culture," he said, "is something that's ongoing."