After this AOL employee benefits fiasco, maybe Tommy Boy will see the error of his ways but don’t count on it. Or, how about if there were more media coverage and public outcries from the Allstate employees regarding Allstate’s greedy cuts to the employee retirement and life insurance benefits. Maybe that would bring Tommy Boy around.:Ratpak11http://mashable.com/2014/02/09/aol-ceo- ... p-forward/AOL CEO Reverses Controversial Benefits Decision, Wife of Staffer Steps Forward
A company’s inner-office policies can be a sensitive topic, particularly when that office is AOL, one of the most high-profile media brands on the Internet, and especially when the topic is employee benefits.
That’s why when AOL CEO Tim Armstrong was reportedly heard during a recent conference call linking a change to the company’s 401(k) benefits package to the birth of two “distressed babies,” which he claimed cost the company $1 million each, the public’s reaction was, shall we say, less than favorable.
In a transcript detailing the offending comment, published by Re/Code on Feb. 6, Armstrong said: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.
The benefits change in question specifically referred to Armstrong’s plan to delay the delivery of employee matching 401(k) payments, delivering them in a single lump sum, which would be paid after the year in which the benefit was earned.
In addition to a follow-up internal memo, presumable designed to quell the anger surrounding his comments, Armstrong further backed up his viewpoint during an appearance on CNBC, during which he specifically cited Obamacare as part of the issue affecting the company’s benefits package for employees.
Immediately following the wide exposure of Armstrong’s comments, the public’s outrage was made plain via social media. A number of well-known media professionals knocked the already embattled CEO for what many viewed as a callous approach to cost cutting.
That social media storm was swiftly followed by an open letter to Armstrong from AOL employees, which stated, in part:We strongly object to the new 401(k) matching practice and encourage the company to reverse its policy. Single lump-sum 401(k) contributions are an unnecessarily risky investment strategy and deprive workers who leave the company of retirement benefits they have earned.
Following the general outrage, which showed no signs of letting up, on Feb 8. Armstrong reversed his decision, sending out an internal memo that AOL-owned site Techcrunch published the same day. In the letter, Armstrong wrote: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.
In the letter, Armstrong also addressed his comments linking the children of employees to the issue. Armstrong wrote: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.
That might have been the end of the matter, but now the situation has taken a new turn that promises to further put Armstrong, and his policies, up for criticism.
One of the mothers of the two babies mentioned by Armstrong has stepped forward to offer her side of the story. Her tale not only further humanizes the issue of employee benefits, but highlights exactly how painful Armstrong’s benefits discussion was for many staffers at the company.
In a Slate op-ed published on Sunday, titled, “My Baby and AOL’s Bottom Line,” Deanna Fei, an author, the mother of two, and the wife of an AOL employee, outlines what happened during her recent child birth procedure.
Fei describes the pain caused by the difficult child birth, which was fraught with peril for the baby, but eventually resulted in what is today a healthy baby girl. But it’s when Fei turns her attention toward Armstrong that the true callousness of the CEO’s comments come to bear.I take issue with how he reduced my daughter to a “distressed baby” who cost the company too much money. How he blamed the saving of her life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting.
Later, after citing Armstrong’s $12 million salary, Fei also wrote:For me and my husband—who have been genuinely grateful for AOL’s benefits, which are actually quite generous—the hardest thing to bear has been the whiff of judgment in Armstrong's statement, as if we selfishly gobbled up an obscenely large slice of the collective health care pie.
This latest episode comes only months after Armstrong was at the center of another flurry of negative attention for the company after he abruptly fired a Patch executive in front of hundreds of employees.
How Armstrong’s reputation will fare after this latest gaffe may not be as important as how AOL’s employees decide to move forward in the wake of yet another hit to the company’s image regarding the treatment of its employees.
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Gabrielle Kratsas, USATODAY 7:05 p.m. EST February 9, 2014
It's been a rough few days for AOL CEO Tim Armstrong and things could get worse. He's ignited a firestorm of protests from employees and others about the company's move to scale back its 401(k) contribution match and blaming it on the company's health care costs associated with the births in 2012 of two "distressed babies" and the higher costs of the Affordable Care Act.
Last week in a town hall meeting with employees, Armstrong announced the company's decision to change the company's 401(k) contribution match to a lump sum at the end of each calendar year instead of paycheck to paycheck.
It meant that workers who left before Dec. 31 were out of luck on a matching contribution for the year. It also meant all workers could no longer invest their 401(k) match throughout the year, avoiding the potential misfortune of investing a lump sum just as stock prices are headed south.
Employees expressed outrage and by Sunday, the company had reversed its change to the 401(k) contribution match and he had apologized for his remarks. But the mother of one of the babies wants a personal apology and posted an article Sunday on Slate.com "My Baby and AOL's Bottom Line," describing the health problems of her daughter born four months premature on Oct. 9, 2012.
Deanna Fei, whose husband works as an editor for AOL, wrote: "I take issue with how ... he blamed the saving of (my daughter's) life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting."
Armstrong apologized in an email to employees late Saturday. "On a personal note, I made a mistake and I apologize for my comments last week at the town hall when I mentioned specific health care examples."
"This is commendable," Fei wrote, "but the damage to my family had already done."
Others inside and outside the company seem to agree. The incident was fodder for cable news talk shows throughout the weekend and the outrage went viral on social media.
"I don't get why AOL's CEO Tim Armstrong still has his job today," tweeted Robert Scoble, a startup liaison officer at Rackspace Hosting in San Francisco.
"Is AOL CEO a caveman? Blaming employee pregnancies for money woes?" tweeted Eve Tahmincioglu, director of communications for the Families and Work Institute in New York.
AOL and Armstrong did not immediately respond to a request for comment.
The fear remains that other companies may switch to a year-end lump sum 401(k) match, which can add up to thousands of dollars in lost retirement savings for employees. IBM went to a similar plan in December in a cost-saving measure, creating a backlash among workers and prompting criticism from a few members of the Senate.
It's no small change for the workforce if it catches on, considering 75% of Americans get the bulk of their retirement savings from 401(k) investments.
The practice is perfectly legal but not widespread yet. Just 9% of companies pay out 401(k) matches in lump sums once a year and require workers to work a certain number of hours or be employed on Dec. 31, according to Deloitte.
Here are a few ways it can shrink workers's nest eggs:
1. You leave, you lose. In short, it makes 401(k) balances less portable, which hurts job hoppers. To get the match, AOL had said you have to still be employed at the company on Dec. 31. The downside: Employees who leave the company for another job during the year don't get the match.
"Let's say you leave (a company) on Nov. 30, that means you have worked 11 of 12 months but you will get zero in matching contributions, which is not really fair," says Anthony Sabino, a business and law professor at St. John's University.
2. You miss out on gains. "As a participant, I want the money as soon as possible," says Frank Fantozzi, president and CEO of Planned Financial Services, a Cleveland-based firm that runs retirement plans for 50 companies, all of which deposit 401(k) matches with each paycheck.
"And as an investor," adds Fantozzi, "I want to get the money in the market as soon as I can. Getting the money on Dec. 31 theoretically means you miss out on a year of earnings."
In 2013, for example, when the Standard & Poor's 500 stock index rose 30%, investors that had to wait to get their matching contribution on the last day of the year missed out on huge gains.
3. The market is heading south. Investors might have the misfortune of investing the lump sum when stock prices are moving downward, such as at the start of a market dip, says Andy Busch, editor of The Busch Update.
"If you try to invest it all at once, you run into market-timing issues," he says, adding that a big investment in stocks at the start of the year would have added up to losses as stocks began selling off early in 2014.
USA TODAY's Adam Shell contributed to this story