Thursday, February 6, 2014



AOL chairman blames ‘distressed babies’ for company changing 401(k) benefits

By Arturo Garcia
Thursday, February 6, 2014 18:10 EST
AOL chairman Tim Armstrong 020614 [CNN]
AOL chair and chief executive officer Tim Armstrong publicly blamed two employees’ “distressed babies” and the Affordable Care Act for his company’s decision to stop employees from collecting a portion of their 401(k) benefits if they leave before the end of a given year.
The Washington Post reported that AOL employees will now collect their benefits in a lump sum at the end of every calendar year, rather than getting them with every paycheck. Employees will forfeit that right, however, if they leave before Dec. 31 of that given year.
While stating that he does not have an opinion about the health care law itself, Armstrong argued that “Obamacare,” as it is known, has increased AOL’s health care costs by $7.1 million, with a large portion of that devoted to the care of the unidentified employees’ children.
“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,” Think Progress quoted Armstrong as saying. “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.”
However, given that AOL has 50,000 employees and posted a $679 million revenue increase in the fourth quarter of 2013, at least one expert told Think Progress, Armstrong’s claim is hard to believe.
“The Affordable Care Act is simply a convenient whipping boy for any decision an employer makes to cut benefits,” Washington and Lee University law professor Tim Jost was quoted as saying. “Assuming AOL had reasonably generous coverage like most large employers, it should not have experienced any significant changes in its benefit structure for 2014. Perhaps it had to pick up a few more employees that had not been covered before or reduce premiums for a few employees, but it is hard to see $7.1 million here.”
Watch Armstrong discuss the changes to employee benefits in an interview aired on Thursday on CNN below.