Pacific Gas & Electric (PG&E) was struggling financially well before the coronavirus took its toll on the American economy. According to The New York Times, PG&E emerged from bankruptcy in late June 2020, after putting $5.4 billion and 22.19% of its stock into a trust for victims of wildfires. This of course is a result of PG&E pleading guilty to 84 counts of involuntary manslaughter. As of this August, PG&E faces scrutiny for its role in a California Dixie fire covering 447,723 acres of land and destroying 370 structures, per The Guardian. Obviously, this leaves PG&E in a tight position, finding itself needing to cut costs.
But what will be on the chopping block? Could PG&E be the next corporation to suspend or reduce their company match program?
Time and time again we have seen that during a recession, corporations will decrease or suspend benefits. According to CNBC, 95% of companies offer a company match or some alternate contribution program. However, that same article states “Don’t be surprised if your employer pauses its contributions to your 401(k) plan during the U.S. economic downturn.” This happened during the 2001 recession when General Motors, Charles Schwab, Goodyear Tire, and Ford all decreased or suspended their company match programs. We saw this again in 2008, with Forbes reporting that nearly 20% of companies with over 1,000 employees reduced or suspended 401(k) contributions. Unfortunately, this 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. Lockheed Martin also made big news with their announcement to cut benefits in 2019, and again on August, 2021. 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.
Matching 401(k) contributions is one of the most popular benefits which PG&E offers. A recent study showed that on average, employees who don’t maximize their company match leave $1,336 of possible retirement money on the table each year. Clearly, a suspension of these benefits would dramatically change many PG&E employee's plans for retirement.
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. employee’s contributions to their retirement savings plans. The suspension of these benefits began on October 1st, 2020, and is set to reverse exactly one year later, on October 1st, 2021. 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 reintroduced beginning on October 1st, after a one-year suspension.
When benefits are frozen, employees in the mid to late portion of their career are usually hurt the most. If PG&E's 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:
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“The Retirement/Transition Guide for PG&E Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://utility.theretirementgroup.com/pge-educate
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https://www.reuters.com/business/energy/exxon-plans-reinstate-employer-401k-match-oct-1-2021-07-02/
https://www.thelayoff.com/at-and-t
https://www.theguardian.com/us-news/2021/aug/08/dixie-fire-california-blaze-pge-role
https://www.marketwatch.com/story/employers-start-to-suspend-their-401k-match-2020-04-21