Will Your Company End 401(k) Matching?

Healthcare Provider Update: Healthcare Provider for Pacific Gas & Electric The primary healthcare provider for employees of Pacific Gas and Electric (PG&E) is often covered under large insurance carriers that offer comprehensive plans, including offerings from Blue Cross Blue Shield and UnitedHealthcare; the exact provider may vary depending on the employee's specific plan and regional options available. Projected Healthcare Cost Increases in 2026 As we look ahead to 2026, healthcare costs are anticipated to rise significantly due to a combination of factors. Insurers are reporting average premium increases that could exceed 20%, driven largely by ongoing inflation in healthcare services and the potential expiration of enhanced subsidies provided under the Affordable Care Act. This perfect storm of rising medical costs and diminished financial support could shock many consumers, with estimates suggesting that out-of-pocket premiums might surge by as much as 75% for individuals reliant on marketplace plans. As such, both employees and employers within PG&E should prepare for heightened expenses, taking proactive steps now to mitigate potential financial impacts. Click here to learn more

There has been a consistent economic trend showing that corporations will decrease or suspend benefits when a recession strikes. 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 has continued 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, including Amtrak, Marriott Vacations Worldwide, and Tenet Health. General Electric & Lockheed Martin also made big news with their announcements to cut benefits in 2020. AT&T even cut pension benefits to hit their target goal of $10 billion in cost cuts. 

Will PG&E 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 PG&E 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. So obviously a suspension of these benefits could dramatically change 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 recently 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 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 reinstated beginning on October 1st, 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.  

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