Employer cut 403b contribution to zero

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Topic Author
RevFran
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Employer cut 403b contribution to zero

Post by RevFran » Wed May 13, 2020 7:01 pm

Hello Bogleheads.

Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans. My contribution has been close to 10k a year. I have maxed my own contributions for the last 14 years. I am 43 and think it very likely I’ll stay at this school for the rest of my career.

At the practical level, I am not sure what to do in response to this: a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level) b) try to save some portion of 10k in a taxable account (perhaps act like I am 50 and save the equivalent of the catch up?) c) do whatever I have to, in terms of scrimping, to save an additional 10k (this would be close to impossible...) d) something I am not thinking of.

I appreciate any and all responses and advice. I will note, I am less distraught and panicked about this than I would have predicted — in part because saving at what some people might have thought an insane rate over the years means this is a blow, but it is not catastrophic.

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FiveK
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Re: Employer cut 403b contribution to zero

Post by FiveK » Wed May 13, 2020 7:10 pm

RevFran wrote:
Wed May 13, 2020 7:01 pm
... a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level)
One vote for this.

Of course, if you decide some spending has been extravagant and decide to cut back so you can invest more in taxable, go for it. But if you are happy with your spending, this probably won't affect you significantly in the long run.

runner3081
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Re: Employer cut 403b contribution to zero

Post by runner3081 » Wed May 13, 2020 7:14 pm

Same thing happened to me. Match was stopped at the end of the April.

I don’t plan on it ever coming back.

As for what I did?

Calculated the amount I was losing every month and added that amount to my vanguard monthly investment, post tax account.

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obafgkm
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Re: Employer cut 403b contribution to zero

Post by obafgkm » Wed May 13, 2020 7:20 pm

RevFran wrote:
Wed May 13, 2020 7:01 pm
Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans.
My university - a liberal-arts college - is considering it. We have a pay freeze for next year, and our CFO said that depending on how things turn for the fall that two possible options are a paycut during the year or a reduction in 403(b) employer contributions. More likely, she said, is to reduce 403(b) contributions instead of a paycut so employees wouldn't lose take-home money. Open enrollment started last week and for right now, my salary is the same and no reduction in 403(b) employer contributions.

The senior administrators have agreed to a 10%-15% cut in pay for next year.

Swimmer
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Re: Employer cut 403b contribution to zero

Post by Swimmer » Wed May 13, 2020 7:30 pm

I have worked for not-for-profits as well. I would learn as much as possible about the custodian of your 403(b). At one point, we had Principal who was charging very high fees that were not visible without a lot of searching. Our HR department didn’t understand fees and kept saying there were none. Ha! The Principal sales guy HR referred me to didn’t even understand my questions.

I was one to always max out as well, but there was a point in time when fees were extremely high. I only contributed enough to get the company contribution. The rest I invested myself in taxable.

When they switched to TIAA, where fees were reasonable at the time, I went back to my max contribution.

I guess what I’m trying to say is just because it’s a 403b, it’s not necessarily a good deal. Even more so when there’s no employer match.

Just my experience.

Trader Joe
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Re: Employer cut 403b contribution to zero

Post by Trader Joe » Wed May 13, 2020 7:32 pm

RevFran wrote:
Wed May 13, 2020 7:01 pm
Hello Bogleheads.

Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans. My contribution has been close to 10k a year. I have maxed my own contributions for the last 14 years. I am 43 and think it very likely I’ll stay at this school for the rest of my career.

At the practical level, I am not sure what to do in response to this: a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level) b) try to save some portion of 10k in a taxable account (perhaps act like I am 50 and save the equivalent of the catch up?) c) do whatever I have to, in terms of scrimping, to save an additional 10k (this would be close to impossible...) d) something I am not thinking of.

I appreciate any and all responses and advice. I will note, I am less distraught and panicked about this than I would have predicted — in part because saving at what some people might have thought an insane rate over the years means this is a blow, but it is not catastrophic.
It appears that you have no/zero say so in this matter. If so, you should accept this change or you should find another job that matches up your needs/expectations.

As for myself, I would never accept this change.

260chrisb
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Re: Employer cut 403b contribution to zero

Post by 260chrisb » Wed May 13, 2020 7:39 pm

FiveK wrote:
Wed May 13, 2020 7:10 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
... a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level)
One vote for this.

Of course, if you decide some spending has been extravagant and decide to cut back so you can invest more in taxable, go for it. But if you are happy with your spending, this probably won't affect you significantly in the long run.
Yes, this! You've maxed for 14 years. Plan to max for 14 more! My bet is they will reinstate it.

aristotelian
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Re: Employer cut 403b contribution to zero

Post by aristotelian » Wed May 13, 2020 7:48 pm

What do you mean "My contribution has been 10k" and "I have maxed my contribution 10 years"? Individual contribution max is 19500. Are you saying you have been contributing just enough to get your max employer match?

You should continue your contributions to take advantage of saving pretax. You should certainly not redirect your contributions to a brokerage account. If you cut back the 10k going to retirement, you will only get perhaps 7K back in your paycheck after federal and state tax. You are much better off maintaining your contributions.

Topic Author
RevFran
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Re: Employer cut 403b contribution to zero

Post by RevFran » Wed May 13, 2020 7:51 pm

Thanks for the question. To clarify: what I received from the university is about 10k; on top of that, I max
my own contribution ($19,500).

student
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Re: Employer cut 403b contribution to zero

Post by student » Wed May 13, 2020 8:02 pm

RevFran wrote:
Wed May 13, 2020 7:01 pm
Hello Bogleheads.

Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans. My contribution has been close to 10k a year. I have maxed my own contributions for the last 14 years. I am 43 and think it very likely I’ll stay at this school for the rest of my career.

At the practical level, I am not sure what to do in response to this: a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level) b) try to save some portion of 10k in a taxable account (perhaps act like I am 50 and save the equivalent of the catch up?) c) do whatever I have to, in terms of scrimping, to save an additional 10k (this would be close to impossible...) d) something I am not thinking of.

I appreciate any and all responses and advice. I will note, I am less distraught and panicked about this than I would have predicted — in part because saving at what some people might have thought an insane rate over the years means this is a blow, but it is not catastrophic.
Johns Hopkins? This is probably nothing much you can do except to hope that they will do the right thing and resume it next year. People at JHU (I am assuming that it is) are top tier folks and they can move so I would expect that it will resume the contribution as soon as it can afford to.

Katietsu
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Re: Employer cut 403b contribution to zero

Post by Katietsu » Wed May 13, 2020 8:09 pm

Trader Joe wrote:
Wed May 13, 2020 7:32 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
Hello Bogleheads.

Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans. My contribution has been close to 10k a year. I have maxed my own contributions for the last 14 years. I am 43 and think it very likely I’ll stay at this school for the rest of my career.

At the practical level, I am not sure what to do in response to this: a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level) b) try to save some portion of 10k in a taxable account (perhaps act like I am 50 and save the equivalent of the catch up?) c) do whatever I have to, in terms of scrimping, to save an additional 10k (this would be close to impossible...) d) something I am not thinking of.

I appreciate any and all responses and advice. I will note, I am less distraught and panicked about this than I would have predicted — in part because saving at what some people might have thought an insane rate over the years means this is a blow, but it is not catastrophic.
It appears that you have no/zero say so in this matter. If so, you should accept this change or you should find another job that matches up your needs/expectations.

As for myself, I would never accept this change.
What would you do? Give up a good job that you presumably enjoy, possibly with tenure, to be unemployed? It is not a good time to get a University job at all. There is a flat out hiring freeze at our D-1 University and I suspect that is the norm. And, if you could get a new position, there is a good chance that your alternative employers have already cut retirement contributions or would be offering a reduced salary.

To the OP: You have left out a very important piece of information. Do you need the extra savings to reach your goals? Would any level of additional savings need hard budget cutbacks elsewhere? Without knowing the answer to these questions, my response would be leave things as they are right now and reassess in a couple of years.

Grt2bOutdoors
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Re: Employer cut 403b contribution to zero

Post by Grt2bOutdoors » Wed May 13, 2020 8:14 pm

RevFran wrote:
Wed May 13, 2020 7:51 pm
Thanks for the question. To clarify: what I received from the university is about 10k; on top of that, I max
my own contribution ($19,500).
Upsetting to have deferred compensation cut, but perhaps think of this another way? You still have your job! while others are losing theirs. Yes, you may be in demand or held in high regard, but finances can affect most institutions even those thought of as "untouchable"? This cut is likely one of many such actions being taken at your institution and has/will occur at countless other places non-profit, for profit, etc. We saw things like this occur in 2008/2009 only to be reinstated in subsequent years. My former employer froze their cash balance plan and never reinstated it, they also cut the match in the 401k plan, but later instituted an increase after the financial crisis eased. Cutting benefits like a retirement contribution is a more palatable solution compared to terminating staff, though I suspect there will be some of that too if the economic downturn worsens and/or endowments shrink.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
RevFran
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Re: Employer cut 403b contribution to zero

Post by RevFran » Wed May 13, 2020 8:18 pm

Katietsu wrote:
Wed May 13, 2020 8:09 pm

: You have left out a very important piece of information. Do you need the extra savings to reach your goals? Would any level of additional savings need hard budget cutbacks elsewhere? Without knowing the answer to these questions, my response would be leave things as they are right now and reassess in a couple of years.
Some unhelpful answers to your questions: to question 1, I don’t know; to question two, yes.

oldfatguy
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Re: Employer cut 403b contribution to zero

Post by oldfatguy » Wed May 13, 2020 8:20 pm

RevFran wrote:
Wed May 13, 2020 7:01 pm
d) something I am not thinking of.

Look for another job?

Topic Author
RevFran
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Re: Employer cut 403b contribution to zero

Post by RevFran » Wed May 13, 2020 8:37 pm

Grt2bOutdoors wrote:
Wed May 13, 2020 8:14 pm

Upsetting to have deferred compensation cut, but perhaps think of this another way? You still have your job! while others are losing theirs.
I am, yes, very—very—glad to still have a job, and I am not suggesting this was necessarily the wrong thing for the school to do. I am simply trying to decide: what’s the best thing for me personally to do, vis a vis saving more or not, given this change.

Dregob
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Re: Employer cut 403b contribution to zero

Post by Dregob » Wed May 13, 2020 8:45 pm

Same here. I was notified that 403B contributions will be suspended for one year (at least) today.
I'm not thrilled but all in all I'm not going to complain.
Do I have a job? Yes.
Do I want to look for a job in this environment? No.
The "lost" 403B contributions may be peanuts if the market truly tanks.

Grt2bOutdoors
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Re: Employer cut 403b contribution to zero

Post by Grt2bOutdoors » Wed May 13, 2020 8:50 pm

RevFran wrote:
Wed May 13, 2020 8:37 pm
Grt2bOutdoors wrote:
Wed May 13, 2020 8:14 pm

Upsetting to have deferred compensation cut, but perhaps think of this another way? You still have your job! while others are losing theirs.
I am, yes, very—very—glad to still have a job, and I am not suggesting this was necessarily the wrong thing for the school to do. I am simply trying to decide: what’s the best thing for me personally to do, vis a vis saving more or not, given this change.
If you are still able, continue to max out your account and accept the contributions they do make into your account. Save if you can, but not to the point where it affects your state of mind or standard of living where you are eliminating necessities to save for retirement. Reassess at the end of the year, if you have any extra in your budget that will allow you to designate it as long term savings. But if you can not, I don't think you need to be necessarily concerned. A year or even a few years of reduced contributions should not make a significant dent in your ability to retire. Have you determined the long term cost of this event? Again, something to be considered but not immediately.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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MNGopher
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Re: Employer cut 403b contribution to zero

Post by MNGopher » Wed May 13, 2020 8:55 pm

The match must not be part of your contract at the University? I'm K-12 Education, and our small 403b match is part of our contract, so couldn't just be dropped without negotiating a new contract or voting on a MOU.

Mudpuppy
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Re: Employer cut 403b contribution to zero

Post by Mudpuppy » Wed May 13, 2020 9:01 pm

FiveK wrote:
Wed May 13, 2020 7:10 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
... a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level)
One vote for this.

Of course, if you decide some spending has been extravagant and decide to cut back so you can invest more in taxable, go for it. But if you are happy with your spending, this probably won't affect you significantly in the long run.
I would agree with this approach, but I have another reason to recommend looking closely at your spending. Eliminating the 403b match is the first sign of fiscal distress at your institution. Universities will likely suffer more fiscal distress due to the economy, changes in research funding and fundraising, and changes in enrollment that are resulting from the pandemic. If a salary cut is the next stage, you should already have reviewed your spending when you aren't as fiscally distressed, and therefore are more able to make choices based in logic instead of in emotion.

cherijoh
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Re: Employer cut 403b contribution to zero

Post by cherijoh » Wed May 13, 2020 9:32 pm

RevFran wrote:
Wed May 13, 2020 8:18 pm
Katietsu wrote:
Wed May 13, 2020 8:09 pm

: You have left out a very important piece of information. Do you need the extra savings to reach your goals? Would any level of additional savings need hard budget cutbacks elsewhere? Without knowing the answer to these questions, my response would be leave things as they are right now and reassess in a couple of years.
Some unhelpful answers to your questions: to question 1, I don’t know; to question two, yes.
Not to sound flippant, but shouldn't you try and answer question 1 instead of polling an anonymous internet board for recommendations? Otherwise, it sounds like you are simply looking for confirmation for sticking to the status quo. But you are the one who will have to live with the consequences, not anyone posting an opinion.

The Boglehead wiki has links to several retirement planning calculators that will help you address the question of whether you are in Ok shape even without the university contribution.

terran
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Re: Employer cut 403b contribution to zero

Post by terran » Wed May 13, 2020 9:40 pm

Swimmer wrote:
Wed May 13, 2020 7:30 pm
I have worked for not-for-profits as well. I would learn as much as possible about the custodian of your 403(b). At one point, we had Principal who was charging very high fees that were not visible without a lot of searching. Our HR department didn’t understand fees and kept saying there were none. Ha! The Principal sales guy HR referred me to didn’t even understand my questions.

...

I guess what I’m trying to say is just because it’s a 403b, it’s not necessarily a good deal. Even more so when there’s no employer match.

Just my experience.
Always a good idea to make sure you fully understand the plan you're dealing with, but in the OP's case I doubt a plan at a large R1 university has these problems. From what I've seen university plans are usually quite good, especially at larger schools.

kidshrink
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Re: Employer cut 403b contribution to zero

Post by kidshrink » Wed May 13, 2020 9:56 pm

Any option to go into self employment?

Solo 401ks allow at least $57k per year.

Elena
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Re: Employer cut 403b contribution to zero

Post by Elena » Wed May 13, 2020 10:04 pm

My R1 never contributed anything to our 403b or 457b. I max out both plans out of my own paycheck.

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windaar
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Re: Employer cut 403b contribution to zero

Post by windaar » Thu May 14, 2020 12:02 am

Trader Joe wrote:
Wed May 13, 2020 7:32 pm
As for myself, I would never accept this change.
I am in Academia and will fully accept this if happens to me. I'll accept a salary freeze as well. And I'd accept a pay cut. I love what I do and there are not a lot of options for unemployed Ph.D.s out there except I guess Taco Bell!
Nobody knows nothing.

BV3273
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Re: Employer cut 403b contribution to zero

Post by BV3273 » Thu May 14, 2020 6:46 am

My employer stopped all 401k matching until further notice. This is going to cost me thousands of dollars but at least I’m still getting paid my full salary.

awval999
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Re: Employer cut 403b contribution to zero

Post by awval999 » Thu May 14, 2020 6:55 am

My health system also stopped all 403b matching contributions. They also cut the pay of senior leadership for 10 weeks.

I don't know why this is surprising. Health systems hemorrhaging. Universities are worrying about the Fall and students not enrolling in full time "online" classes at full rate + room and board.

In order of pain to the "average" employee:
1. Eliminate travel/food/conference budget.
2. Remove matching 403b contributions
3. Eliminate annual raises
4. Partial furlough of existing staff
5. Laying off employees

aristotelian
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Re: Employer cut 403b contribution to zero

Post by aristotelian » Thu May 14, 2020 6:58 am

RevFran wrote:
Wed May 13, 2020 8:37 pm
Grt2bOutdoors wrote:
Wed May 13, 2020 8:14 pm

Upsetting to have deferred compensation cut, but perhaps think of this another way? You still have your job! while others are losing theirs.
I am, yes, very—very—glad to still have a job, and I am not suggesting this was necessarily the wrong thing for the school to do. I am simply trying to decide: what’s the best thing for me personally to do, vis a vis saving more or not, given this change.
Why would the lack of match change your decision? You are still getting the advantage of saving pretax. You are maxing now above the match so I assume you have already decided the tax advantage works out for voluntary contributions.

I guess one alternative to consider is increasing your cash emergency fund in case your job itself may be at risk. Just remember you only get 700 back for every 1000 you could contribute to your retirement plan.

wfrobinette
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Re: Employer cut 403b contribution to zero

Post by wfrobinette » Thu May 14, 2020 12:23 pm

RevFran wrote:
Wed May 13, 2020 7:01 pm
Hello Bogleheads.

Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans. My contribution has been close to 10k a year. I have maxed my own contributions for the last 14 years. I am 43 and think it very likely I’ll stay at this school for the rest of my career.

At the practical level, I am not sure what to do in response to this: a) nothing— accept that I will have a 1/3 reduction in my 403b savings this year and, of course, possibly in the future (if I had to guess, I’d guess that in a few years, the university will resume contributing, but at a lower level) b) try to save some portion of 10k in a taxable account (perhaps act like I am 50 and save the equivalent of the catch up?) c) do whatever I have to, in terms of scrimping, to save an additional 10k (this would be close to impossible...) d) something I am not thinking of.

I appreciate any and all responses and advice. I will note, I am less distraught and panicked about this than I would have predicted — in part because saving at what some people might have thought an insane rate over the years means this is a blow, but it is not catastrophic.
I'd maintain what you are doing now and reevaluate if the match doesn't come back. It stings to lose that match. I'd rather lose the 10k match than lose any salary. If they have to cut deeper that's next.

Anyone saying they wouldn't accept this and go find a new job is completely out of touch with what is happening in the economy. We went from a full on employees market to full on employers market.

As soon as it's feasible, I'm sure the matches will come back.

wfrobinette
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Re: Employer cut 403b contribution to zero

Post by wfrobinette » Thu May 14, 2020 12:29 pm

oldfatguy wrote:
Wed May 13, 2020 8:20 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
d) something I am not thinking of.

Look for another job?
Might as well suggest winning the lottery or find a rich benefactor because those are just about as likely as finding a new job right now.

aristotelian
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Re: Employer cut 403b contribution to zero

Post by aristotelian » Thu May 14, 2020 12:40 pm

wfrobinette wrote:
Thu May 14, 2020 12:23 pm
I'd maintain what you are doing now and reevaluate if the match doesn't come back. It stings to lose that match. I'd rather lose the 10k match than lose any salary. If they have to cut deeper that's next.

Anyone saying they wouldn't accept this and go find a new job is completely out of touch with what is happening in the economy. We went from a full on employees market to full on employers market.


As soon as it's feasible, I'm sure the matches will come back.
Especially higher education. It's been an employers' labor market for several decades now.

student
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Re: Employer cut 403b contribution to zero

Post by student » Thu May 14, 2020 12:59 pm

aristotelian wrote:
Thu May 14, 2020 12:40 pm
wfrobinette wrote:
Thu May 14, 2020 12:23 pm
I'd maintain what you are doing now and reevaluate if the match doesn't come back. It stings to lose that match. I'd rather lose the 10k match than lose any salary. If they have to cut deeper that's next.

Anyone saying they wouldn't accept this and go find a new job is completely out of touch with what is happening in the economy. We went from a full on employees market to full on employers market.


As soon as it's feasible, I'm sure the matches will come back.
Especially higher education. It's been an employers' labor market for several decades now.
This is certainly true for areas in social science and humanities. In my mid tier university, the CS department has trouble filling positions and to retain their faculty members.
Last edited by student on Thu May 14, 2020 1:23 pm, edited 1 time in total.

oldfatguy
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Re: Employer cut 403b contribution to zero

Post by oldfatguy » Thu May 14, 2020 1:02 pm

wfrobinette wrote:
Thu May 14, 2020 12:29 pm
oldfatguy wrote:
Wed May 13, 2020 8:20 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
d) something I am not thinking of.

Look for another job?
Might as well suggest winning the lottery or find a rich benefactor because those are just about as likely as finding a new job right now.
So one shouldn't even bother looking? My university is currently furloughing and laying off employees in some areas, and at the same time hiring new people in other areas.

delamer
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Re: Employer cut 403b contribution to zero

Post by delamer » Thu May 14, 2020 1:16 pm

RevFran wrote:
Wed May 13, 2020 8:18 pm
Katietsu wrote:
Wed May 13, 2020 8:09 pm

: You have left out a very important piece of information. Do you need the extra savings to reach your goals? Would any level of additional savings need hard budget cutbacks elsewhere? Without knowing the answer to these questions, my response would be leave things as they are right now and reassess in a couple of years.
Some unhelpful answers to your questions: to question 1, I don’t know; to question two, yes.
Now is the time to to figure out the answer to how much income you’ll need in retirement. Get an estimate for future Social Security benefits and any monthly pension. Take a look at your current spending and estimate how that will change in retirement. Compare expected expenses to expected income. You might want to try running your numbers at https://i-orp.com/Inflate/index.html

It’s also time to consider negative current scenarios of a pay cut or a temporary furlough, and see how you’d pay your bills today. Don’t assume that the worst thing that can happen is the elimination of the match. It’s a good time to have a substantial emergency fund.

Jack FFR1846
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Re: Employer cut 403b contribution to zero

Post by Jack FFR1846 » Thu May 14, 2020 1:20 pm

Contrary to popular belief (here, anyways), not all employers give ANY match to retirement savings. In my working years, half of those I worked for have any match at all.

At my current (corporate business) employer, we've taken a 10% cut in salary and during our quarterly CEO call this week, it was hinted that our (no more than 2% based on a complex formula and ok'd by the board 4 times a year) match will be paid this quarter but it's not off the table to eliminate it for next quarter. Meanwhile, our quarter just ending is better than the same quarter last year. Bonuses that in the past were cash paid in the next paycheck following this meeting are now given as RSUs, the first vesting in 2024. I already know I won't be working there in 2024, so it's zero to me.
Bogle: Smart Beta is stupid

DoTheMath
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Location: The Plains

Re: Employer cut 403b contribution to zero

Post by DoTheMath » Thu May 14, 2020 1:29 pm

I'd go with doing nothing, perhaps with a side of trying to tighten the budget. It is hard to imagine that the cut in contributions will last for more than a couple of years and it sounds like making up those contributions would be a challenge. But this is a good time to be looking to trim spending and increase the emergency fund. It is entirely possible that pay cuts or furloughs are still to come.

I think the OP's experience is going to be typical and maybe better than most. Pay cuts in some form are coming for nearly everyone. A number of universities have already announced significant cuts to benefits, furloughs and even, gasp!, cuts to the salaries of administrators and coaches. And some of these are the relatively wealthy, large, private universities (e.g. JHU, Northwestern). Schools which are smaller, are public, or are less prestigious are bound to be hit even harder.
“I am losing precious days. I am degenerating into a machine for making money. I am learning nothing in this trivial world of men. I must break away and get out into the mountains...” -- John Muir

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RevFran
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Re: Employer cut 403b contribution to zero

Post by RevFran » Thu May 14, 2020 1:47 pm

Thanks to everyone for this input. I have tentatively decided to split the difference as it were -- to try to save, over fiscal 20-21, $6,000 -- which is to say, the same amount I'll add to my 403b contribution in 7 years when I turn 50. To be honest, I'm not sure I can easily do this -- I switched in January from trad. 403(b) contributions to Roth, which has already reduced my monthly takehome noticeably. But, I'm going to try! For the moment, I've just set up monthly transfers to a HY savings account. I may subsequently decide to go ahead and put this money in my brokerage, or put it toward a mortgage payment, but at least the first decision has been made -- try to make up some, but not all, of the now-missing university contribution, and try to do so in a way that "practices" for my 50-and-beyond catchup.

Thanks again for the input!

wfrobinette
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Re: Employer cut 403b contribution to zero

Post by wfrobinette » Thu May 14, 2020 1:55 pm

oldfatguy wrote:
Thu May 14, 2020 1:02 pm
wfrobinette wrote:
Thu May 14, 2020 12:29 pm
oldfatguy wrote:
Wed May 13, 2020 8:20 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
d) something I am not thinking of.

Look for another job?
Might as well suggest winning the lottery or find a rich benefactor because those are just about as likely as finding a new job right now.
So one shouldn't even bother looking? My university is currently furloughing and laying off employees in some areas, and at the same time hiring new people in other areas.
Was trying to be funny . But changing now, I think, is a very risky proposition.

1. FIFO usually comes into play unless you are a poor performer.
2. Employer finding out you are looking can put you at the top of a layoff list

wfrobinette
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Re: Employer cut 403b contribution to zero

Post by wfrobinette » Thu May 14, 2020 2:01 pm

RevFran wrote:
Thu May 14, 2020 1:47 pm
Thanks to everyone for this input. I have tentatively decided to split the difference as it were -- to try to save, over fiscal 20-21, $6,000 -- which is to say, the same amount I'll add to my 403b contribution in 7 years when I turn 50. To be honest, I'm not sure I can easily do this -- I switched in January from trad. 403(b) contributions to Roth, which has already reduced my monthly takehome noticeably. But, I'm going to try! For the moment, I've just set up monthly transfers to a HY savings account. I may subsequently decide to go ahead and put this money in my brokerage, or put it toward a mortgage payment, but at least the first decision has been made -- try to make up some, but not all, of the now-missing university contribution, and try to do so in a way that "practices" for my 50-and-beyond catchup.

Thanks again for the input!
Switch back to traditional or do a split between the two to free up $.

student
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Re: Employer cut 403b contribution to zero

Post by student » Thu May 14, 2020 2:02 pm

wfrobinette wrote:
Thu May 14, 2020 1:55 pm
oldfatguy wrote:
Thu May 14, 2020 1:02 pm
wfrobinette wrote:
Thu May 14, 2020 12:29 pm
oldfatguy wrote:
Wed May 13, 2020 8:20 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
d) something I am not thinking of.

Look for another job?
Might as well suggest winning the lottery or find a rich benefactor because those are just about as likely as finding a new job right now.
So one shouldn't even bother looking? My university is currently furloughing and laying off employees in some areas, and at the same time hiring new people in other areas.
Was trying to be funny . But changing now, I think, is a very risky proposition.

1. FIFO usually comes into play unless you are a poor performer.
2. Employer finding out you are looking can put you at the top of a layoff list
I am assuming OP is a tenured faculty member. There is no stigma on someone who is trying to leave. First, it is difficult for a tenured faculty member to leave. Second, administration themselves are trying to leave. A dean wants to be a provost (and most likely have to move to another place), the provost wants to be a president, and the president wants to move to a bigger place.

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hand
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Re: Employer cut 403b contribution to zero

Post by hand » Thu May 14, 2020 2:29 pm

RevFran wrote:
Wed May 13, 2020 8:37 pm

I am, yes, very—very—glad to still have a job, and I am not suggesting this was necessarily the wrong thing for the school to do. I am simply trying to decide: what’s the best thing for me personally to do, vis a vis saving more or not, given this change.
It is worth doing the math to see the impact of the $10k/ yr reduction on your expected retirement total and expected retirement income.
I was really surprised to find how small an impact retirement contributions in my 40s and 50s had in my personal model after heavy contributions in my 20s and 30s.

While I recognize that alternatives may be limited and unattractive if you're a tenured PhD and love what you do, it may be worth considering that the pre-2020 American university model was looking unsustainable - cheap and unreasonably large student loans allowed universities to binge on luxury capital improvements and a cost structure that in many cases made cost of a university education greater than the value delivered.

Good news is that universities aren't holding the debt of students who will never be able to repay, but as with the housing market in 2007-2009 it seems likely that defaults on these loans will meaningfully impact university pricing power going forward. Worth considering whether The COVID is accelerating the end of the good times for universities and their employees rather than simply a bump in the road.

If the cut to your 403(b) is a one-off, simply press on, but if it represents the canary in the coal mine you might want to consider more drastic options.

as9
Posts: 165
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Re: Employer cut 403b contribution to zero

Post by as9 » Thu May 14, 2020 2:32 pm

Also lost my 401k match for the rest of the year (as of May 1). It's kind of like getting a $6k comp deduction, which stinks, but I get it.

Xrayman69
Posts: 475
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Re: Employer cut 403b contribution to zero

Post by Xrayman69 » Thu May 14, 2020 3:47 pm

oldfatguy wrote:
Thu May 14, 2020 1:02 pm
wfrobinette wrote:
Thu May 14, 2020 12:29 pm
oldfatguy wrote:
Wed May 13, 2020 8:20 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
d) something I am not thinking of.

Look for another job?
Might as well suggest winning the lottery or find a rich benefactor because those are just about as likely as finding a new job right now.
So one shouldn't even bother looking? My university is currently furloughing and laying off employees in some areas, and at the same time hiring new people in other areas.
Positions that are “still” looking to be filled in my team and organization are only for “mission critical”. Otherwise we are in a hiring freeze environment. In fact we have transparently stated that if ANYONE has the opportunity for a promotion in a different organization the leadership would do all that we can to help the individual land the new position (including moving expenses in terms of a “cash” moving stipend.

New employees or team members that join are also the last in and perhaps at risk to be first out in the future with regards to non merit based seniority. Careful about jumping ship as there are known and unknown potential consequences.

I have ALWAYS encouraged my team members to seek alternatives that can improve them professionally and or economically. I hold no ill will and find it to be a badge of honor when those individuals land “promotions” or go off on their own to start their own “shop”. I’m also glaringly upfront with individuals regarding their reviews and prospects within and beyond our group in relations to the economic and professional landscape. Timing matters, in 2013 superstars were having a hard time with middle management positions. In 2018 underperformers were being offered senior management opportunities.

I suspect in the current business cycle that cash preservation and very conservative budgeting is the norm as visibility is poor for future prospects.

macher
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Re: Employer cut 403b contribution to zero

Post by macher » Wed May 20, 2020 6:23 pm

obafgkm wrote:
Wed May 13, 2020 7:20 pm
RevFran wrote:
Wed May 13, 2020 7:01 pm
Today, my employer - a research-one university - announced that for the coming fiscal year, there would be no employer contributions to our 403b plans.
My university - a liberal-arts college - is considering it. We have a pay freeze for next year, and our CFO said that depending on how things turn for the fall that two possible options are a paycut during the year or a reduction in 403(b) employer contributions. More likely, she said, is to reduce 403(b) contributions instead of a paycut so employees wouldn't lose take-home money. Open enrollment started last week and for right now, my salary is the same and no reduction in 403(b) employer contributions.

The senior administrators have agreed to a 10%-15% cut in pay for next year.
I work for the University of PA and they aren’t cutting employer contributions but there’s a hiring freeze, minimum pay raises and anyone making $70k or more no raises. My wife who works there too was hired before they got rid of the pension. I don’t see the pension fund going belly up.

Traveler
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Re: Employer cut 403b contribution to zero

Post by Traveler » Wed May 20, 2020 6:45 pm

I don't know about you, but during the last two-three months I have not been spending as much. You could use that savings to fund a retirement account.

JD2775
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Re: Employer cut 403b contribution to zero

Post by JD2775 » Wed May 20, 2020 9:50 pm

Sorry to hear that.....I am just waiting for this to happen at my MegaCorp. I am anticipating 1 of 3 things happening in the next few months...

A. Layoffs
B. 401k matching pulled (currently at 9%, so pretty good)
C. Salary decrease

The 3rd one is unlikely I would think, I am guessing either A or B will happen.

macher
Posts: 212
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Re: Employer cut 403b contribution to zero

Post by macher » Thu May 21, 2020 5:34 am

JD2775 wrote:
Wed May 20, 2020 9:50 pm
Sorry to hear that.....I am just waiting for this to happen at my MegaCorp. I am anticipating 1 of 3 things happening in the next few months...

A. Layoffs
B. 401k matching pulled (currently at 9%, so pretty good)
C. Salary decrease

The 3rd one is unlikely I would think, I am guessing either A or B will happen.
University of PA also offering $1500 grant to employees at 0% interest. Rumors said it’s free but I doubt it. You’ll have to pay it back with payroll deductions.

I’m in a union so our raises and 9% employer match are contractually obligated. If there are layoffs it won’t affect me because I’m top 10% on the seniority list out of 550.

University of PA hasn’t mentioned layoffs but minimal raises for people making under $70k. In my 25 years there the University has never had layoffs and I think they never did before that.

My wife and I both work at Penn and although we could have made more money elsewhere I’m glad we stayed. My wife has 32 years and I have 25 years. Job security is important and we aren’t going anywhere until we retire in another 14 years. My wife is the the defined pension plan because she started before they did away with it.
Last edited by macher on Thu May 21, 2020 5:41 am, edited 1 time in total.

chw
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Re: Employer cut 403b contribution to zero

Post by chw » Thu May 21, 2020 5:39 am

OP, I would do nothing. I suspect the 403b match will return in time- likely in 12-24 months. I went thru this at my employer during the Great Recession as well. Employers generally suspend the match to avoid wider layoffs in the organization.

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Ralph Furley
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Re: Employer cut 403b contribution to zero

Post by Ralph Furley » Thu May 21, 2020 6:13 am

It seems one way we can tell this financial crisis is different than those of the past - tenured professors at major universities are now being impacted. The Univ. of Michigan is projecting a $1,000,000,000 loss. That's Billion with a B.

I've often felt like a lot of Bogleheads seem to be government employees, univ. employees, engineers at major corps., etc. with incredibly stable employment and Cadillac retirement plans and options. As a freewheeling entrepreneur working without a net, at times I've felt a little envious of some of those benefits. Most of my retirement saving is forced into taxable accounts at this point.

And now here we are....all in the same boat, together, rowing, and asking why our feet feel wet. OP and others, sorry this is happening to you.

macher
Posts: 212
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Re: Employer cut 403b contribution to zero

Post by macher » Thu May 21, 2020 6:35 am

Ralph Furley wrote:
Thu May 21, 2020 6:13 am
It seems one way we can tell this financial crisis is different than those of the past - tenured professors at major universities are now being impacted. The Univ. of Michigan is projecting a $1,000,000,000 loss. That's Billion with a B.

I've often felt like a lot of Bogleheads seem to be government employees, univ. employees, engineers at major corps., etc. with incredibly stable employment and Cadillac retirement plans and options. As a freewheeling entrepreneur working without a net, at times I've felt a little envious of some of those benefits. Most of my retirement saving is forced into taxable accounts at this point.

And now here we are....all in the same boat, together, rowing, and asking why our feet feel wet. OP and others, sorry this is happening to you.
My wife and I earn a total of $94k gross. We both work at University of PA. I work full time, she works permanent part time(28 hours a week). Compare to A LOT of Bogleheads we make far far less. I’m not envious because it’s about lifestyle and debt. We don’t have much debt at all and live a good life. We live in a newly renovated row houses in Philly and are happy.

What I find with people in my income bracket and situation with secure employment is we chug along for 35 years either getting a pension or contributing to an employer match plan and when we are ready to retire the chugging along pays off. Chugging along doesn’t mean you’re in a crappy old job. In fact I enjoy my job and probably won’t retire until I drop dead. My job is gravy and no stress.

macher
Posts: 212
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Re: Employer cut 403b contribution to zero

Post by macher » Thu May 21, 2020 6:42 am

chw wrote:
Thu May 21, 2020 5:39 am
OP, I would do nothing. I suspect the 403b match will return in time- likely in 12-24 months. I went thru this at my employer during the Great Recession as well. Employers generally suspend the match to avoid wider layoffs in the organization.
During the Great Recession it didn’t really shake my employer University of PA. Yea there were hiring freezes but everyone got their usual raises.

However you can’t compare this to the Great Recession. Penn doesn’t anticipate opening until September. My wife who also works at Penn is working from home. Her department is still getting outside funding so she’s busy. I’m an essential employee also at Penn and working on a hybrid schedule 20 hours a week but still getting paid 40 hours. The only thing I’m missing is over time which is a significant part of our income which has always been for 25 years like 22% more than my base salary.

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