There has been a consistent economic trend, showing that corporations will decrease or suspend benefits in times of economic recession. According to CNBC, 95% of companies offer a company match or some alternate contribution program. However in that same article, they stated, “Don’t be surprised if your employer pauses its contributions to your 401(k) plan during the U.S. economic downturn.” 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 suspended their 401(k) matching programs last 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 on Layoff.com of AT&T considering cutting benefits to hit their target goal of $10 billion in cost cuts.
Will Kaiser Permanente 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 Kaiser Permanente 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. Clearly, a suspension of these benefits would dramatically change many 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 last year, 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 had 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, 2021, 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.
Sources:
- 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.
- “The Retirement/Transition Guide for Kaiser Permanenete Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://pharma.theretirementgroup.com/kp-guide-download-google
- O’Brien, Sarah. “401(k)s Contributions from Employers May Drop during Economic Downturn.” CNBC, CNBC, 31 Mar. 2020, https://www.cnbc.com/2020/03/31/employers-may-drop-401k-matches-as-companies-look-to-cut-expenses.html.
- Business, Matt Egan, CNN. “Verizon’s Alternative to Layoffs: Retraining 20,000 Workers – CNN.” CNN, CNN, 14 July 2020, https://www.cnn.com/2020/07/14/business/verizon-jobs-ceo-hans-vestberg/index.html.
- Kelly, Jack. “Companies In Their Cost Cutting Are Discriminating Against Older Workers.” Forbes, Forbes, 3 Aug. 2020,
- Noe, Eric. “After Verizon, Are Pension Freezes on the Way? – ABC News.” ABC News, ABC News, 16 Dec. 2005, https://abcnews.go.com/Business/story?id=1378711.
- “Pension Lump-Sum Payment Windows Are Back.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://retirekit.theretirementgroup.com/pension-lump-sum-payment-windows-are-back-e-brochure
- Root, Al. “Pension Plans Continue to Fade Away. Why That Brings New Worries.” Barron’s | Financial and Investment News, Barrons, 11 May 2020, https://www.barrons.com/articles/pension-plans-continue-to-fade-away-why-that-brings-new-worries-51589199204.
- “AT&T Layoffs – TheLayoff.Com.” TheLayoff.Com, https://www.thelayoff.com/at-and-t. Accessed 13 Aug. 2020.
- 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.
https://www.reuters.com/business/energy/exxon-plans-reinstate-employer-401k-match-oct-1-2021-07-02/
