AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies”

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/06/aol-chief-cuts-401k-benefits-blames-obamacare/

by joshwa • 12 years ago

26 48 12 years ago

jseip• 12 years ago

The worst thing about a struggling company is the petty, demoralizing measures management takes to cut costs. Save a few million in 401k costs but waste eight figures in decreased productivity, increased employee turnover, and lower morale overall. This seems shortsighted.

ericd• 12 years ago

The worst part is it doesn't appear to be struggling, but the CEO painted the only two options of dealing with $7M in increased healthcare cost as either passing it on to the employees, or decreasing some benefit.

GFK_of_xmaspast• 12 years ago

If management is going to do something to anger the workforce, it's in their interest to get workers angry at each other instead of management.

pmorici• 12 years ago

I'm confused as to how this will actually save them any money over time. Won't it just encourage everyone who wants to quit to wait until the 401k payout date to the extent possible and then do it all at once?

throwaway19792• 12 years ago

People don't always optimize. I've known two people in this situation who left money on the table. Even if you quit on Jan 30'th, that's one month of money left on the table.

jonknee6• 12 years ago

They could fire a lot of people before the end of the year...

aNoob7000• 12 years ago

I completely agree with you. If I were an employee of AOL, I'd personally start looking for a way out.

When a CEO of a company becomes so petty as to point out the medical problems of a few employees (exactly two), he deserves zero respect or loyalty from his employees.

minimax• 12 years ago

"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," said Armstrong

AOL does something like $2 billion in revenue per year. This cost would have been a fraction of one tenth of one percent of revenue. What. a. shithead.

throwaway19792• 12 years ago

Blaming this on distressed babies is disgusting.

fnordfnordfnord• 12 years ago

What if he's trying to humblebrag?

jonknee6• 12 years ago

... And would be fully insured. That's literally the reason why insurance exists.

waterlesscloud3• 12 years ago

He's saying he's cutting 401K matching for people who leave the company during a given year so that the company can continue paying for extraordinary medical costs for its employees.

It's a tradeoff, and morally it looks like the right one to me. Pay less to people who left to the company so you can continue paying more in health benefits to those who remain.

mikeryan• 12 years ago

He's also touting record profits. The morally correct decision is to do both.

Jtsummers2• 12 years ago

They aren't in a position where they actually need to choose one or the other. They can do both. Your position (penalize people for leaving before year end) will hurt the company. The article mentions the financial losses for both the people that leave (for a multitude of reasons), and the financial loss for those who stick around. But it's also a destruction of a very useful benefit that should help the company be competitive in hiring. 401k matching is one of the major tradeoffs people use for determining which job to take (or stay at). Now AOL is telling prospective employees: You'd better be loyal or we'll screw you over.

kmunoz• 12 years ago

Actually, this ruins 401k plans for folks who stick with the company too. Employees miss out on all the compounding throughout the year from the contributions.

From WaPo:

"In other words, employees will have to stay through the end of the year to get the match, and then the contribution won't even come during 2014. In a year like last year, where the stock market was roaring, the difference for an employee who left in December could amount to thousands of dollars in pay and added savings."

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/04/a...

mkaziz• 12 years ago

I feel for those poor women whose colleagues probably know about their "distressed" babies.

jonknee6• 12 years ago

Luckily, thanks to "Obamacare" they can leave AOL and know they will be able to have affordable insurance.

NoPiece• 12 years ago

They will be able to get insurance, but it won't be affordable.

_delirium• 12 years ago

Tim Armstrong already has a reputation as being a bit of a jerk: https://news.ycombinator.com/item?id=6197081

Previously, though, he was head of advertising at Google (1999-2009), and I don't remember him causing much negative publicity in that role.

mattdeboard• 12 years ago

There are things you tally in the back of your mind as costs -- like, for example, a couple of outliers in the health benefit cost spreadsheet that correspond to newborns with urgent medical needs -- and then there are things you kinda-sorta bring up to the media as having caused you to cut benefits back.

It doesn't reflect too well on this guy's people skills if something in his brain didn't say, "I'm about to blame sick children for cutting my employees' benefits, maybe I should shut up."

AceJohnny22• 12 years ago

I'm surprised the company (not the insurance) had to pay that much for the babies medical bills.

I had a friend die to leukemia a year ago (she had just turned 27). 6 months prior to that, her first month in Stanford Hospital for chemo led to a bill to the insurance on the order of one million dollars.

I don't know how much the insurance billed the company (a small one without AOL's income), but they upheld it.

Tim Armstrong is the same CEO who last year fired Abel Lentz, chief creative officer of Patch, on the spot during his company-wide layout call [1]. I'm inclined to label him a Gordon Gekko-level psychopath.

[1] http://www.forbes.com/sites/susanadams/2013/08/14/aols-chief...

VladRussian2• 12 years ago

I'm surprised the company (not the insurance) had to pay that much for the babies medical bills.

my understanding that AOL self-insures for medical.

jonknee6• 12 years ago

Which makes this even more offensive to pass off as increased costs because of "Obamacare". They were either providing sub-par coverage before or he's lying about increased costs.

us0r• 12 years ago

Most large companies do as it is cheaper.

wlievens4• 12 years ago

Is the actual medical care so much more expensive in the US than in Europe? I'm not talking about the insurance system or anything like that, I'm talking about the actual hospitalization cost.

My twins spent six weeks in NICU in a large hospital and then three more in a smaller regional hospital. The actual hospitalization cost for the NICU stay was about €25k each. Granted, there were no complications, but I can't imagine how even with multiple surgeries how you can add that up to a million dollars.

AceJohnny22• 12 years ago

Yup. Coming from Europe as well, I was shocked by the cost of healthcare (even when insured) in the US. Random googled link with graphs to give you an idea: http://www.huffingtonpost.com/2013/10/03/health-care-costs-_...

drawkbox• 12 years ago

This is why both healthcare and benefits from employment beyond cash and salary are many times bad. Companies should have no part in your healthcare/insurance, retirement savings or any other private aspect beyond reimbursing you for costs. I think independent pools of healthcare is the only way, outside of a company, wider nets with less impact.

outside1234• 12 years ago

tl;dr: Tim Armstrong is a sociopath. AOL is a terrible place to work. Take your skills elsewhere.

staunch• 12 years ago

Old style, hired gun, selfish, cost-cutter CEO with absolutely no original ideas, or any clue how to turn the company around. It appears AOL's corporate culture is as out of date as their products.

Why would anyone voluntarily work with someone who's obviously such a shitty human being? The board of directors must be as bad at their jobs as he is.

jobu• 12 years ago

This seems more like a political statement than an actual explanation.

Armstrong pissed away $200 million on Patch, and is still blaming the $7.1 million in Obamacare costs for reducing employee benefits.

AznHisoka• 12 years ago

The sad thing is I know a couple of mommy blogs that get more traffic than Patch.

wlievens4• 12 years ago

That so sounded like a bad yo momma joke.

fleitz2• 12 years ago

Here's the thing, it's a hot market, if you work at AOL, just walk out the door. It's Feb so you're not missing much contribution.

Or calculate how much you lost by the decision and go ask for a raise for 4 times as much. Tell them you gave $100 to someone down the street because their baby was sick and so now you need more money because your wife doesn't like the way the quarterlies are going to look after you spent $200 million at the bar getting drunk.

a3n3• 12 years ago

Now that we don't use CDs to install software anymore, what does AOL produce?

fleitz2• 12 years ago

Like Google,Facebook,Yahoo they produce ads / eyeballs, nothing more, nothing less.

Bahamut• 12 years ago

Sounds like he just hurt his company's prospects for hiring quality employees here in the DMV area with that crap explanation.

anigbrowl• 12 years ago

It's not often someones actually makes my skin crawl.

ergoproxy• 12 years ago

We just saw that big tech firms collude to hold down employee pay! See https://news.ycombinator.com/item?id=1699529

That means, in effect, there's only one employer in the tech industry. So the labor market in tech is not an example of a perfectly competitive market. It actually follows a monopsony model.

In a monopsonistic labor market, raising wages/benefits doesn't reduce employment, it actually increases employment, increases output and lowers prices...all good things! See my comments here for a fuller explanation: https://news.ycombinator.com/item?id=7185717

Therefore, Obamacare did not hurt the tech labor market. Tim Armstrong is full of $hit. They should take away his degree in economics if he really believes his own bullcrap. He was just covering his own a$$. Maybe what's hurting his employees, stockholders and customers is his own overblown $3,216,534 salary in 2011. Source: http://www.forbes.com/profile/tim-armstrong/

AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies”

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