Fortune 500 announced last October that they would no longer be matching U.S. employee’s contributions to their retirement savings plans. The suspension of these benefits officially began on October 1st, 2020. According to Reuters, Fortune 500 had experienced “its first back-to-back quarterly loss in 36 years because of the drop in demand during the novel coronavirus pandemic." Reuters recently reported that the Oil giant would be reinstating its contribution match programs exactly a year later, this October 1st.
Fortune 500 currently has two savings plans available to employees, the first is the U.S. Fortune 500 Savings Plan (EMSP) and the second is the U.S. Supplement Savings Plan (SSP). According to a document which Fortune 500 sent to its employees, the company’s current policy for the EMSP is to match “a 6% minimum employee contribution with 7% of the participant’s pay” (“U.S. Fortune 500 Savings Plan Changes”). The SSP is a separate plan which “provides the continuation of the company match amounts beyond certain IRS-prescribed dollar contribution figures” (“U.S. Fortune 500 Savings Plan Changes”). Both of these match programs will be reinstated beginning on October 1st.
Fortune 500 is just one of 46,000 businesses which had decided to cut 401(k) contributions during the pandemic. According to CNBC, around 8% of employers have reduced or suspended benefits.
Predictably, this announcement had not been received well by Fortune 500 employees. Reuters reported that, “at Exxon’s Baytown, Texas, refinery and chemical plant, the United Steelworkers (USW) local union plans to file a demand to negotiate over the change in the savings plan." Employee satisfaction is yet to be observed as the company resumes matching employee contributions.
According to Fortune 500, the original decision was an attempt to reduce cost “in response to the current business environment” (“U.S. Fortune 500 Savings Plan Changes”). This announcement comes in the midst of a recession which has been especially difficult on the oil & gas industry. Late last year, Forbes came out with an article claiming Fortune 500 experienced “a first-quarter loss of $610 million, a 126% decrease from the same time period in 2019, after a plunge in the price of oil” (Gross). According to Reuters, Neil Chapman, Fortune 500’s Senior Vice President, stated in 2020, that the company would be cutting capital and operating expenses to protect their dividend.
According to International Business Times, "Exxon, America’s largest oil company, is reportedly eager to maintain its annual $15 billion annual dividend and must make cuts to preserve the payout." IBT also reported that Fortune 500's shares had plummeted by 35%, and the company borrowed 18 billion dollars last year alone. In April of 2020, Fortune 500 had already dropped their 2020 budget by 30%.
It has been a tough few weeks in the press for Fortune 500. In late July last year, it was reported by multiple sources that Fortune 500 was effectively laying people off through PIP. A PIP, or “Performance Improvement Plan” is essentially a severance offer to leave the company. According to Forbes, Fortune 500 made changes to their performance evaluation process in order to justify more job cuts. Back in April of 2020, they raised the number of employees who were in the “Needs Significant Improvement” (NSI) category from 3% to 8% of all US workers (Gross). Employees who were placed in the NSI category qualified for a PIP. Fortune 500 employs about 75,000 people, so an 8% reduction would result in about 6,000 people out of a job. According to Business Insider, the changes made to Fortune 500’s employee evaluation process were an attempt to “cut more jobs without traditional layoffs.”
Sources:
Seba, Erwin. “Exxon to Suspend Company Match to Employee Retirement Plans in October: Sources.” Reuters, 4 Aug. 2020.
Jones, Benji. “Leaked Documents Reveal Exxon Changed Its Employee Ranking System amid the Coronavirus Pandemic, Putting More Workers at Risk of Getting Cut.” Business Insider, 24 July 2020. https://www.businessinsider.com/leaked-documents-exxon-changed-performance-reviews-cut-workers-2020-7
The Retirement Group or www.theretirementgroup.com
Ghosh, Palash. “Exxon Mobil Considers Layoffs, Spending Cuts To Save Its Dividend.” International Business Times, https://www.facebook.com/IBTimes, 30 July 2020, https://www.ibtimes.com/exxon-mobil-considers-layoffs-spending-cuts-save-its-dividend-3019739.
Hiller, Jennifer, et al. “Exxon Prepares Spending, Job Cuts in Last Ditch Move to Save Dividend.” Reuters, 30 July 2020.
Gross, Elana. “Fortune 500 Reportedly Changed Its Employee Review Process To Increase Performance-Related Job Cuts.” Forbes, 24 July 2020.
“Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
“Fortune 500 Corp. Layoffs – TheLayoff.Com.” TheLayoff.Com – Layoffs Discussion Board, 27 July 2020, https://www.thelayoff.com/exxon-mobil
Sklover, Alan. “‘My Severance Agreement Says I Can Never Re-Apply; Can I Get around That?’ – Sklover Working Wisdom.” Sklover Working Wisdom, 20 Mar. 2014, https://skloverworkingwisdom.com/my-severance-agreement-says-i-can-never-re-apply-can-i-get-around-that/.
“Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.
XOM Summary Plan Description, 2017
“U.S. Fortune 500 Savings Plan Changes.” Fortune 500 Employee Connect, https://hr.na.xom.com/us/benefits-policies/investmentindex#a1399111-ffff-4778-970e-cc8bb06ddd8a. Accessed 5 Aug. 2020.
https://www.reuters.com/business/energy/exxon-plans-reinstate-employer-401k-match-oct-1-2021-07-02/
