Verizon is one of the few corporations who have not conducted layoffs during the pandemic. On the contrary, the company has actually retrained 20,000 workers for new careers. Verizon was already in the midst of a plan to cut $10 billion in spending by 2021 before the pandemic hit. It’s hard to believe they’ve been able to keep all their workers on payroll and continue to cut costs. Without using traditional layoffs Verizon will need to find other ways to trim their budget during the economic downturn brought on by the Coronavirus. This begs the question, will Verizon end its 401(k) Matching Program?
This would not be the first time Verizon has cut benefits to reduce costs. Employees who have been with the company for awhile will remember that Verizon froze its pension plan back in 2005. According to ABC News, Verizon stopped contributing to the pension plans of managers who did not belong to a union. Alternatively, they offered them an enhancement to the existing 401(k) plans, which began in 2006. The cut affected 50,000 management employees. At the time Verizon justified the cuts by claiming, “its future economic picture made it necessary”. Freezing the pension in this case was an attempt to lower labor costs in order to outperform its competitors. ABC reported at the time that Verizon hoped to save $3 billion over a 10 year period by switching from a DB pension plan to an enhanced 401(k) plan. If Verizon chooses to end 401(k) matching as well, it would be yet another blow to the retirement plans of Verizon employees.
There has been a consistent economic trend which shows that when a recession hits, corporations will decrease or suspend benefits. In the 2001 recession we saw General Motors, Charles Schwab, Goodyear Tire & Rubber, & Ford all decrease or suspend their company match programs. 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.
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. According to Reuters, These match programs are set to continue, come October 1st, 2021.
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.
Sources:
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.
“The Retirement/Transition Guide for Verizon Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://telecom.theretirementgroup.com/verizon-educate
Alicia H Munnell. “Employers Start to Suspend Their 401(k) Match - MarketWatch.” MarketWatch, MarketWatch, 6 Aug. 2020, https://www.marketwatch.com/story/employers-start-to-suspend-their-401k-match-2020-04-21.
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.
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/
