In mid-July 2020, when public accounting CEOs were still looking at ways to slash costs because of the Rona’s impact on their firms, we started receiving tips from KPMGers about their retirement and pension plans taking a hit:
KPMG announced this week they are cutting pension and 401k contributions in half for 2020.
According to a 2018 compensation and benefits document for campus hires, new KPMG employees are eligible to enroll in the firm’s 401(k) plan and make contributions through payroll deductions 60 days after starting. The document also states:
- KPMG matches 50% of each eligible dollar you contribute to the plan based on contributions up to 5% of your eligible base pay. This gives you a maximum matching contribution of 2.5% of your eligible base pay for the calendar year assuming you contribute at least 5% of your base pay and you are employed on December 31.
- You are always 100% vested in your own contributions (as adjusted for investment returns). As for KPMG’s matching contributions and any investment return thereon, you become fully vested in these amounts gradually over your first five years of employment with the firm, beginning with 20% vesting after two years of service.
So during summer 2020, KPMG’s 401(k) match was cut from 2.5% to 1.25%. This was months before the House of Klynveld axed approximately 1,400 employees.
Now a little more than a year later, with public accounting firms getting pretty close to pre-pandemic normalcy, KPMG decided now would be a good time to make improvements to its benefits and compensation package focused on mental, physical, social, and financial well-being.
In a post on LinkedIn yesterday, KPMG Chair and CEO Paul Knopp outlined a handful of changes the firm is planning to enact:
For our people’s health: We will reduce employee health care premiums by 10% in 2022, with no change in the benefit levels, and introduce health care advocacy services. With health care inflation projected to be 6% next year, this represents savings of 16% for our plan participants.
For their families: We will provide up to three weeks of additional paid caregiver leave, separate and apart from PTO, for employees to spend time caring for a member of their family or household with a serious health condition, including time to grieve the loss of a loved one. In addition, we will offer two new caregiver concierge programs that can help our professionals navigate a wide range of needs.
For new parents: All parents will receive 12 weeks of paid parental leave to bond with a newborn, newly-adopted or new foster care child, regardless of who the primary caregiver is. Under the former program, we provided six weeks for primary caregivers and two weeks for non-primary caregivers. This is in addition to disability leave for employees who give birth, allowing some employees at the firm up to 22 weeks of paid leave.
For all: Without daily commutes to the office, the boundary between our work and personal lives has become even more blurred. Twice per year we take a firm-wide break, giving our people at least nine consecutive days to disconnect and spend time with family and friends. These shutdowns are part of an expanding holiday calendar that now provides 16 paid holidays per year, including Juneteenth. These firmwide holidays complement a generous PTO program, “no camera Fridays,” and no internal meetings on Wednesday afternoons.
For each other: We’ve increased the ways our people can recognize each other’s extraordinary achievements with financial awards, electronic gift cards and experience-based rewards.
But this section was the one that stood out in Knopp’s LinkedIn post:
For their future: We will replace our current KPMG 401(k) match and pension programs with a single, automatic firm-funded contribution within the 401(k) plan equal to 6–8% of eligible W-2 pay. The new plan will feature market-leading flexibility as all employees will receive the contribution without any requirement to contribute their own money.
We haven’t heard from anyone at KPMG yet about their reaction to the new 401(k) contribution policy changes, but in a post on Fishbowl, some KPMG fishes seem pretty pleased by what the firm is doing, including lowering the vesting period from five years to three years:
We haven’t yet analyzed (soon!) how KPMG employee raises this year compared to previous years, but from early indications, they seemed pretty good. Better than Deloitte’s. With the decent raises coupled with the firm’s new 401(k) plan contribution policy, things are looking up for employees at the red-headed stepchild of the Big 4.
What wasn’t mentioned is that they are dropping the pension credit piece. That piece was a $7,000 credit after one year of service and a further annual credit of 2.5% of your base pay, with a guaranteed minimum appreciation of 5% per year and fully vested after three years.
Not to mention the 6-8% new match. You only really get the 8% if you have been tenured with the firm for more then 10 years. Everyone else only gets 6%.
All told, based on my salary and the amortization of the pension. I’m missing out on no less then $2,000 in potential retirement benefits every year going forward.
Hopefully their “cost savings” is reflected in my salary adjustment next year.
Do the math…you get 6% of salary in benefit now – previously you were getting 5% (2.5% pension and 50% of 5% 401k match). How the heck are you figuring you are missing out on money when you are getting additional 1% salary put into retirement without even having to contribute anything (allowing you to investment flexibility)? Also, 5% was also high water on return given interest rates whereas 401ks have done much better. You could maybe argue the onetime 7k credit overshadows the 1% increase, but that is so short term it won’t ever come close to making up for benefits of new plans (especially when 6% is w2 instead of base like old plans).
I was getting 7% of my salary put annually into my pension with 5% interest guaranteed. I am able to take that money as soon as I retire, not at 59.5 like my 401(k)
Additionally I was getting 2.5% in my 401(k).
Now I get 8% a year into my 401(k) which I cannot touch without penalty until 59.5 and no guarantees on any return. This contribution will not increase with years of service unlike the old pension plan.
In short this new program stinks for long term employees… it’s great for new employees that will leave in <5 years, but reduces long term commitments.
The net result is I now plan to leave earlier than previously planned… so nice job, Paul!!!