There has been a consistent economic trend showing that corporations will decrease or suspend benefits when a recession strikes. We witnessed this in the 2001 recession, when General Motors, Charles Schwab, Goodyear Tire & Rubber, and Ford, all decreased or suspended their company match programs. The same happened in 2008, with Forbes reporting that nearly 20% of companies with over 1,000 employees reduced or suspended 401(k) contributions. Unfortunately, that trend seems to be continuing in the wake of the current recession brought on by the Coronavirus pandemic. According to Market Watch, 16 major companies have suspended their 401(k) matching programs this year including Amtrak, Marriott Vacations Worldwide, and Tenet Health. General Electric & Lockheed Martin also made big news with their announcements to cut benefits in 2019. There have even been rumors of AT&T cutting benefits to hit their target goal of $10 billion in cost cuts.
Will Bank of America be the next corporation to suspend or reduce their company match program? What would the consequences be?
Matching 401(k) contributions is one of the most popular benefits Bank of America offers. A recent study showed that on average, employees who don’t maximize the company match leave $1,336 of possible retirement money on the table each year. So obviously a suspension of these benefits could dramatically change employees' retirement plans.
To get a better idea of what an end to 401(k) Matching would look like, let’s take a look at ExxonMobil. ExxonMobil announced recently that they will no longer be matching U.S. employees' contributions to their retirement savings plans. The suspension of these benefits officially began on October 1st, 2020. According to Reuters, ExxonMobil has now experienced “its first back-to-back quarterly loss in 36 years because of the drop in demand during the novel coronavirus pandemic.”
ExxonMobil has two savings plans available to employees, the first is the U.S. ExxonMobil Savings Plan (EMSP) and the second is the U.S. Supplement Savings Plan (SSP). The company was matching a 6% minimum employee contribution with 7% of the participant’s pay. These match programs will be reinstated beginning on October 1st, per Reuters.
When benefits are frozen, employees in the mid-to-late portion of their career are usually hurt the most. If your company match program does end, it’s a good idea to calculate exactly how much this will affect your retirement savings plan. Forbes recommends maintaining your retirement contributions and even increasing them if you have the funds. This can help compensate for the loss of benefits.
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Waggoner, John. “What to Do If Your Pension Is Frozen.” AARP, 16 Oct. 2019, https://www.aarp.org/retirement/planning-for-retirement/info-2019/pension-plan-freeze.html#:~:text=Other%20major%20companies%20that%20recently,be%20a%20big%20financial%20hit.
Seba, Erwin. “Exxon to Suspend Company Match to Employee Retirement Plans in October: Sources.” Reuters, 4 Aug. 2020.
“U.S. ExxonMobil Savings Plan Changes.” ExxonMobil Employee Connect, https://hr.na.xom.com/us/benefits-policies/investmentindex#a1399111-ffff-4778-970e-cc8bb06ddd8a. Accessed 5 Aug. 2020.