As a recruiter I’m often asked about benefit packages offered by certain companies. Over the last year many Fortune 500 companies have made substantive changes to employees’ benefits with most of the changes hurting the workers. We’ve seen many large corporations choose to cut employee benefits whether that be pension, 401(k), or healthcare. Verizon created headlines all the way back in 2005 when they announced they would freeze their pension program. In the years to come many corporations followed suite by moving to defined contribution plans as opposed to defined benefit plans. This trend culminated in General Electric deciding to freeze the largest pension fund in the United States. Other companies like AT&T & Kaiser Permanente have decided to target retiree healthcare benefits in an attempt to cut costs. For Kaiser Permanente, certain employer groups moved from a fully subsidized retiree healthcare plan to a defined subsidy where employees are responsible for the difference if the subsidy is not enough to cover expenses.
Related Article: Will ExxonMobil Stop Offering a Pension Lump-Sum Option to its Employees?
Which brings us to ExxonMobil. Earlier this year ExxonMobil announced that they would suspend their 401(k) matching program indefinitely. The company used to offer a 7% match on employee contributions to retirement savings plans, but since October that benefit is no longer available. ExxonMobil has also reduced employees through a Performance Improvement Plan (PIP). Most recently ExxonMobil conducted both voluntary and involuntary layoffs in order to reduce costs.
But will these cost-cutting measures be enough or would ExxonMobil go the way of AT&T and cut healthcare benefits? To get a better look at what a healthcare cut at ExxonMobil might look like, let’s take a closer look at AT&T’s recent cuts.
AT&T stated in a Memo that they will be reducing benefits in 2021 and 2022. Employees retiring after 2022 will be hit the hardest, as they will lose all medical coverage typically given to retirees. AT&T will no longer supplement monthly premiums for medical or dental. The cuts may not affect all employees.
This announcement comes on the heels of AT&T alerting employees that they will no longer offer a Healthcare reimbursement account for those who retired after January 1st 2021. Currently things like out of pocket costs, supplemental coverage, and incremental coverage are covered by a healthcare reimbursement account from AT&T. According to AT&T’s Summary Plan description the HRA credit is worth $2,700 for an employee and $1,500 for an eligible dependent. If an employee takes full advantage of this benefit this would be worth $4,200 per year. Over a 20 year period this could save an employee and their family about $84,000.
ExxonMobil & AT&T are not the only companies to cut benefits during the pandemic. History shows time and time again that when a recession hits corporations will decrease or suspend benefits. We witnessed this in the 2001 recession when General Motors, Charles Schwab, Goodyear Tire & Rubber, & 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 CNBC, 8% of employers have reduced or suspended 401(k) contributions in this year alone. Major companies like Amtrak, Marriott Vacations Worldwide, and of course ExxonMobil have all suspended their 401(k) matching programs.
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Sources:
Santone, Angela. “AT&T: Updates to Your Retirement Benefits.” AT&T Memo, AT&T Inc., 15 Dec. 2020
“The Retirement/Transition Guide for ExxonMobil Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://energy.theretirementgroup.com/exxonmobil-guide-download-google
AT&T Nonbargained Summary Plan Description, 2020
Lacurci, Greg. “Covid Pandemic Led Thousands of Businesses to Slash 401(k) Contributions.” CNBC, 17 Dec. 2020, https://www.cnbc.com/2020/12/17/covid-pandemic-led-thousands-of-businesses-to-slash-401k-contributions.html
Tretina, Kat. “What To Do If Your Employer Suspends 401(k) Matching Contributions.” Forbes, Forbes, 10 Apr. 2020, https://www.forbes.com/sites/advisor/2020/04/10/covid-19-employers-suspending-401k-matching-contributions/#7a48068b285f.