Chevron is in the process of cutting costs to help cope with the current recession caused by the pandemic. Coronavirus took a toll on the entire economy, but it came down on the oil & gas industry especially hard. So far, most of Chevron’s cost cutting efforts have come from layoffs. According to Reuters Chevron plans to, “cut 10% to 15% of its worldwide workforce as part of an ongoing restructuring at the second-largest U.S. oil producer”.
But will traditional layoffs be enough? Could Chevron be the next corporation to suspend or reduce their company match program?
One of Chevron’s major competitors, ExxonMobil, announced that it would stop matching employee’s contributions to their retirement savings plans. To get a better idea of what an end to 401(k) Matching would look like, let’s use them as an example. Earlier this month ExxonMobil sent a mass email to their employees alerting them that the company match would be suspended indefinitely. The suspension of these benefits will officially begin 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 suspended indefinitely beginning on October 1st.
There has been a consistent economic trend which shows 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 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.
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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