The Southern Company is in the process of cutting costs to help cope with an economy left behind by the pandemic. Coronavirus took a toll on the entire economy, but it came down on the oil & gas industry especially hard. According to S&P Global, The Southern Company announced plans to cut an additional $1.6 billion in operating expenditures, making the total reduction $2.3 billion.
But what will be on the chopping block? Could The Southern Company be the next corporation to suspend or reduce their company match program?
One of The Southern Company’ major competitors, ExxonMobil, announced that it would stop matching corporate 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 year, ExxonMobil sent a mass email to its employees alerting them that the company match would be suspended indefinitely. 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 corporate 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, according to Reuters.
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 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 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 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 The Southern 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.
For more information regarding The Southern Company' 401(k) matching program, contact your HR department.
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Sources:
“UPDATE: The Southern Company Cuts 2020 Capex Again by $1.6B, Curtails Production | S&P Global Market Intelligence.” Essential Intelligence to Make Decisions with Conviction | S&P Global, 16 Apr. 2020, https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/update-The Southern Company-cuts-2020-capex-again-by-1-6b-curtails-production-58062763.
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 The Southern Company Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://energy.theretirementgroup.com/conoco-phillips-educate
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.
Blanton, Kimberly. “More Cuts to 401(k) Matches Are Coming – MarketWatch.” MarketWatch, MarketWatch, 6 Aug. 2020, https://www.marketwatch.com/story/more-cuts-to-401k-matches-are-coming-2020-04-16.
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.
https://www.forbes.com/sites/jackkelly/2020/08/03/companies-in-their-cost-cutting-are-discriminating-against-older-workers/#72017abd4436.
“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
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What is the 401(k) plan offered by The Southern Company?
The Southern Company offers a 401(k) plan that allows employees to save for retirement through pre-tax contributions, which can grow tax-deferred until withdrawal.
How can I enroll in The Southern Company's 401(k) plan?
Employees can enroll in The Southern Company's 401(k) plan through the online benefits portal or by contacting the HR department for assistance.
Does The Southern Company match employee contributions to the 401(k) plan?
Yes, The Southern Company provides a matching contribution to employee 401(k) accounts, which helps enhance retirement savings.
What is the maximum contribution limit for The Southern Company's 401(k) plan?
The maximum contribution limit for The Southern Company's 401(k) plan is subject to IRS limits, which are updated annually. Employees should refer to the latest IRS guidelines for specific amounts.
Can I change my contribution percentage to The Southern Company's 401(k) plan?
Yes, employees can change their contribution percentage to The Southern Company's 401(k) plan at any time through the online benefits portal.
What investment options are available in The Southern Company's 401(k) plan?
The Southern Company's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles tailored to different risk tolerances.
When can I access my funds from The Southern Company's 401(k) plan?
Employees can access their funds from The Southern Company's 401(k) plan upon reaching retirement age, or under certain circumstances such as financial hardship or termination of employment.
Does The Southern Company offer financial education regarding the 401(k) plan?
Yes, The Southern Company provides financial education resources and workshops to help employees understand their 401(k) options and make informed investment decisions.
What happens to my 401(k) plan if I leave The Southern Company?
If you leave The Southern Company, you have several options for your 401(k) plan, including rolling it over to another retirement account, leaving it with The Southern Company, or cashing it out (subject to taxes and penalties).
Are there any fees associated with The Southern Company's 401(k) plan?
Yes, The Southern Company’s 401(k) plan may have administrative fees and investment-related expenses, which are disclosed in the plan documents.