AOL CEO Tim Armstrong reverses 401(k) policy after negative publicity

Posted Feb 9, 2014

AOL CEO Tim Armstrong has reversed a decision to change 401(k) benefits after some negative publicity. The change was made originally because of higher healthcare costs. Essentially Tim Armstrong blamed Obamacare for the 401(k) changes and cited two “distressed babies” as a result of their increased expenses leading to a decision that AOL would no longer match 401(k) deposits on a regular basis.

?We had a $7.1 million bill from the Obamacare act in general and we had multiple other things that happened at the company healthcare-wise. Two things that happened in 2012 we had two AOLers that had distressed babies that were born that we paid a million dollars each to make sure those babies were okay in general. And those are the things that add up into our benefits cost,? said Armstrong when he made the original decision.

It is worth noting that AOL paid Armstrong $12.1 million in 2012, which is around three times the amount the year before.

Tim Armstrong received a lot of negative publicity about the decision and the mother of one of the distressed babies wrote an article about what her experience was like on

Here is an internal memo that Armstrong wrote in a few days about the reversal:

AOLers –

We began our journey together in 2009, and for the last four years have had an employee-first culture. As I have said before, the ability to change is a strategic advantage for us. With benefit costs increasing, we made a strategic, financial decision last year to revise our employee matching 401K program from a per-pay-period contribution to a yearly lump-sum contribution. We then communicated this decision in the fall through multiple channels to every AOL office in the US.

The leadership team and I listened to your feedback over the last week. We heard you on this topic. And as we discussed the matter over several days, with management and employees, we have decided to change the policy back to a per-pay-period matching contribution. The Human Resource team will be in contact with all employees over the next week to explain the change and to answer any other benefits related questions you might have. We are proud to provide AOLers with a robust benefits offering that spans from exceptional healthcare coverage to 401K?s to AOL fitness programs and beyond. On a personal note, I made a mistake and I apologize for my comments last week at the town hall when I mentioned specific healthcare examples in trying to explain our decision making process around our employee benefit programs.

Thursday we announced an outstanding Q4 and end to our fiscal year. More importantly, it validated our strategy and the work we have done on it. AOL is positioned for future growth and our long-term strategy to be one of the world?s leading media technology companies.

Now, as we begin 2014, let?s keep up our momentum. Thank you for the great 2013 year and for your ongoing passion. And know that I am a passionate advocate for the AOL family ? TA

[Source: Recode]