AOL's Armstrong reverses cuts to 401(k), apologizes for comment

CEO Tim Armstrong announces the reversal of a recent policy to reduce the number of times AOL makes matching contributions to 401(k) plans.

AOL CEO Tim Armstrong. Mario Tama/Getty Images

In response to complaints by AOL employees, CEO Tim Armstrong reversed a recent policy change to reduce the number of times the company makes matching contributions to 401(k) plans.

The company will again make contributions with each pay period instead of once a year, Armstrong wrote in an e-mail to employees Saturday. He also apologized for comments he made during an employee conference call Thursday "when I mentioned specific healthcare examples in trying to explain our decision making process around our employee benefit programs."

During the meeting, Armstrong rationalized the 401(k) reductions as necessary to offset rising health care costs, citing two "distressed babies" born to AOL staffers that cost $1 million to care for.

"Two things that happened in 2012," Armstrong said, according to a Capital New York account of the meeting. "We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan."

Upset employees expressed their displeasure with the policy change in a letter published by Recode. "We strongly object to the new 401(k) matching practice and encourage the company to reverse its policy," employees wrote in the letter. "We also object to the manner in which this practice was disclosed to employees."

Armstrong said Saturday he and his executives had a change of heart after employees complained about the new policy.

"The leadership team and I listened to your feedback over the last week. We heard you on this topic," Armstrong said in his e-mail Saturday. "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."

Armstrong's letter to employees:

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
 

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