Distressed babies killed the 401(k)Blog added by Denis Storey on February 12, 2014
Denis Storey

Denis Storey

Centennial, CO

Joined: September 29, 2010

My Company

Have you heard the one about the CEO who went off script?

In a town hall meeting last week, AOL CEO Tim Armstrong thought he’d get real with employees and tell them straight out why their retirement plans are slimming down like Rachel Frederickson.

In short, rather than pay out the 401(k) match with each paycheck, employees who stuck around would receive a lump-sum payout at year’s end. It wasn’t the amount that was being cut – which is essentially nothing – but the timing of the vesting.

So why, after boasting of the company’s best fiscal performance in a decade, did the chief executive decide to start cutting corners with their benefits?

First, Armstrong went with the new “old standby:” Blame PPACA, claiming AOL got socked with a “$7.1 million bill from the Obamacare act in general and we had multiple other things that happened at the company healthcare-wise.” I’d love to see the actual numbers here (and I’d honestly be surprised if he has).

This is odd since AOL’s self-insured, and they’re exempt, but whatever.

But, as I’m sure most of you have heard by now, things quickly went downhill from there.

“Two things that happened in 2012,” Armstrong told everyone. “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 health care costs, we made the decision, and I made the decision, to basically change the 401(k) plan.”

Distressed, million-dollar babies? You’re telling me this wasn’t covered by their reinsurance? But worse than that, doesn’t this smack of the mob mentality baiting typically seen in drill instructors who punish the entire platoon for a single recruit’s insubordination? Is Armstrong expecting his employees to enforce the rule of law "Full Metal Jacket"-syle with bars of soap wrapped in blankets?

That being, I think these are important conversations to have. The more employees know about benefit costs – all of them – the more they appreciate them and the more intelligently they use them. There’s something to be said for overutilization driving up premiums.

But Armstrong’s delivery is deplorable. You can’t have an intelligent, transparent conversation about employee benefits – and what they cost – while demonizing the very people they’re supposed to benefit. And this is looking past any potential HIPPA violation here by singling out these two plan participants.

Armstrong has since apologized and backtracked, reinstating the old retirement plan. And maybe this tells us why CEOs don’t speak off the cuff more – we probably wouldn’t like what they have to say.

And for those of you who’re wondering, the latest PPACA delay came too late for me to address it today. Besides, I’d like to reach out to a few of you first and get your take. Feel free to call or email with your reaction. And look for it here tomorrow.

Originally published on BenefitsPro.com
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