Exclusive: Citgo Stops Contributions To 401(k) Plans, Will Cut Salaries - Sources
Citgo Petroleum Corp stopped contributions to employee 401(k) retirement plans on Nov. 1 and plans to reduce salaries on Jan. 1 to cope with the effects of the coronavirus pandemic, sources familiar with the moves said.
- Last Updated: November 14, 2020, 10:09 IST
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HOUSTON: Citgo Petroleum Corp stopped contributions to employee 401(k) retirement plans on Nov. 1 and plans to reduce salaries on Jan. 1 to cope with the effects of the coronavirus pandemic, sources familiar with the moves said.
In a message sent to employees that was seen by Reuters, the Houston-based company said the actions were necessary because of the loss of demand resulting from the health crisis.
“The refining industry has been severely affected by the pandemic,” according to the message, which was sent to employees in late October.
U.S. fuel demand is down by more than 10% in 2020 due to lockdowns taken to slow the spread of the coronavirus, which has killed nearly 1.3 million people worldwide, including more than 240,000 people in the United States.
In a statement on Friday, Citgo said it “continues to take aggressive steps to manage costs in order to navigate the challenging environment, including temporarily suspending employer contributions to the company’s 401(k) retirement plan and a 10% reduction in salaries (reduction is applied on a tiered earning level).”.
Fuel demand has recovered since the first wave in the spring, but with infections on the rise in the United States and Europe, consumption is expected to drop again in coming weeks.
The company stopped an automatic 3% contribution to employee 401K plans and a 6% match to employee contributions on Nov. 1, according to the message sent to employees.
As of Jan. 1, 2021, salaries of $100,000 or greater will be reduced by 10% and salaries between $50,000 and $100,000 will be cut on a sliding scale starting at 1% and continuing up to 10%, according to the message.
Citgo also said no bonuses would be paid.
The company said it hoped the cut in 401(k) contributions and pay would be temporary.
“Key drivers for our business – product demand, refining margins and refinery utilization – are all below acceptable levels,” the message said. “As a result, we must make additional cost reductions to protect our liquidity until the economy and industry improves.”
Citgo’s actions are the latest taken by U.S. refiners to contend with plummeting demand due to the pandemic.
Four U.S. refineries have shut down this year because of loss of demand. Refinery utilization for August was 79% of national capacity of 18.6 million barrels per day (bpd), according to the U.S. Energy Information Administration.
The cut in contributions to 401(k) plans affects all employees, but the pay cuts that take effect in January will not apply to hourly employees, the sources said.
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