In a letter to employees, AOL CEO Tim Armstrong reversed the company’s recent decision to change some 401(k) benefits. The move had caused controversy inside the company, especially after Armstrong made a mess of an already tense situation with staffers by rationalizing the cuts because of higher health-care costs.

Worse still, he used the example of two “distressed babies” of employees — claiming that each cost $1 million to care for — as one of those expenses.

Said Armstrong, in part, at an employee meeting:

“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.”


Armstrong’s public utterance problems comes just as the company turned in a very decent quarter, which should have been the focus this week, if not for him essentially stepping all over it with what is a classic case of foot-in-mouth disease. Wonder if that’s covered in the plan?

Here is the internal memo to employees, which is Armstrong’s second in a few days:

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


Sorry for the offensive language. I've been up alll night worrying about my thirteen year old grandson who has run his own multimillion dollar health care bill.

I worry about his parents who are on the verge of bankruptcy because they can't afford the twenty to thirty thousand dollar a year out of pocket expenses that their "good" employer provided insurance doesn't cover.

I worry about the "opportunity cost" of lost wages my daughter incurs while sitting in his hospital room instead in the classroom she loves.

Most of all I worry about his brother and sisters who every day live in fear of losing their big brother.


"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." 

There is a mea culpa, but calling it "a personal note" buried at the end of the longest paragraph drops it to a "my bad". 

Armstrong did not name the 2 employees, which would be a HIPAA violation, but chose to single out these 2 families who already have endured much. Hopefully, he apologized personally to each of their families for an unnecessary intrusion into their lives.

Warren Miller, CFA, CPA
Warren Miller, CFA, CPA

Companies the size of AOL usually self-insure. Absent big hits such as the two to which Armstrong referred, self-insuring is less expensive to big companies than paying insurance premiums for employees' healthcare. The downside is that they expose themselves to high-dollar outlays. I'd bet a lot of money that AOL did, in fact, write the big-bucks checks in 2013 for the two newborns to which the CEO referred.


What makes an executive like Armstrong so uncaring about his employees?  Where are the Howard Schultzes in Silicon Valley?  

It was never made clear if AOL really had to pay out millions for the two employees'  children or if it was - more likely - covered by insurance. If it were the latter Armstrong's comments are even more repulsive.


So - public shaming works!


Hi Warren, true, big companies - those generally over fifty employees - do self-insure. However, don't forget that the majority of those that self-insure also purchase stop-loss coverage. SL caps their liability on individual claims. So, either way. Whether they self-insure or offer traditional health insurance, it is most unlikely that ANYONE actually paid million dollar "claims." These unconscionable monetary claims are pure healthcare provider propaganda.


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