Wells Fargo to Eliminate 401(k) Match for High-Paid Employees–Sources
(This story was updated on Oct. 22 with additional details in fifth and sixth paragraphs.)
In its latest assault on expenses, Wells Fargo & Co. is eliminating the 401(k) retirement account match it makes for employees earning $250,000 or higher, according to company sources.
Wells Fargo spokeswoman Beth Richek said the capital-pressed bank is “evolving” its U.S. compensation and benefits program with a greater emphasis on supporting lower-paid employees.
“While we are changing how the company contributes to the 401(k) plan for some, the overwhelming majority of employees will continue to be eligible for the 6% company matching contribution, and we will continue to offer a comprehensive benefits program for all employees,” she wrote in an e-mail.
The full 6% match will apply only to employees making less than $250,000, she confirmed in a second e-mail, without commenting on whether it has been eliminated in full for higher earners.
In a memo to employees from human resources, Wells said the changes will include a new effort to seed retirement plans for employees making less than $75,000 with annual contributions of 1% of their compensation.
The changes, which will be effective on January 1, 2021, also “reflect competitive practice by limiting the company’s contribution toward benefits for our highest-paid employees,” given their other benefits and sources of income, the memo said.
Wells does “not expect to realize significant savings” from restricting the 401(k) match, Richek said.
The decision to reduce eligibility for the retirement plan match, which the government caps at $17,100 per employee in 2020, appears to be the bank’s broadest stroke to date affecting upper-income employees.
Wells employs more than 266,000 people globally—from tellers and operations employees to investment bankers, wealth advisors and money managers. A significant number of advisors, managers and executives in the Wealth and Investment management division that includes Wells Fargo Advisors will be affected by the 401(k) match decision, said one source.
Pressed by low interest rates, billions of dollars of fines and settlements related to its fake-account scandals and a Federal Reserve cap on assets that curbs its lending limits, the fourth largest U.S. bank has outlined plans to cut $10 billion in annual expenses.
After reporting the company’s first quarterly loss in more than ten years in July, Chief Executive Charlie Scharf ordered executives to calculate “business-by-business and function-by-function how lean we need to be,” the company said in earlier statements.
Wells has begun layoffs—including a “sizable group” of salaried advisors—but officials said the bulk of job trimming will be achieved by keeping positions open as employees leave.
The decision to attack benefits was outlined in an e-mail on Wednesday that took many managers by surprise, said one recipient. It also risks embarrassing the bank by appearing to fiddle with a baseline corporate benefit at a sensitive time.
Scharf publicly apologized last month for saying the bank was struggling to meet its diversity goals because of a shortage of qualified minority candidates. The company on Wednesday emphasized that it is improving benefits for the bulk of its employees.
“Our primary goal is evolving our U.S. benefits program to help create greater economic opportunities for all employees,” Richek wrote.
In addition to making a “base” contribution to 401(k) plans of 1% of “certified compensation” for employees making less than $75,000 annually, Wells will make a “discretionary” contribution of 0% to 4% of annual compensation into a 401(k) for employees making less than $150,000, the memo said. The discretionary contribution will replace Wells’ current profit-sharing contributions, it said.
Wells earlier this year raised the minimum hourly pay for more than 20,000 workers.