Armstrong: ‘Distressed babies’ figured in 401(k) roll-back

armstrong-distressed-babies-figured-401k-roll-back
Tim Armstrong. (AP Photo/Nati Harnik)
Tweet Share on Facebook Share on Tumblr Print

Appearing on CNBC this morning, AOL chief executive Tim Armstrong said: "We have to look at our benefits programs very seriously."

He was explaining why his company recently decided to restructure its 401(k) progam in a way that essentially pulls back the company's employer-matching contributions.

"As a C.E.O. and as a management team," said Armstrong, "we had to decide, do we pass the $7.1 million of Obamacare costs to our employees? Or do we try to eat as much of that as possible and cut other benefits?"

During a subsequent company-wide conference call with employees, Armstrong got a little more specific about some of the costs that had led to the decision on 401(k)s.

MORE ON CAPITAL

ADVERTISEMENT

"Two things that happened in 2012," he said, according to a transcript provided by an AOL employee. "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 healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan."

For at least some employees, Armstrong's effort to show how much care the company takes for the health and wellbeing of its staff failed to land. Though he did not name the employees he referred to, "people were just shocked that two particular women would be singled out on a company-wide call," a person who was on the call told Capital.

AOL did not immediately have a comment about Armstrong's remarks.

But it wouldn't be the first time Armstrong has surprised the troops with candor (or, arguably, insensitivity) in company meetings.

Last August, he fired an employee on the spot during a meeting into which much of the company was listening by phone, because the employee took a picture of Armstrong with his camera phone.

AOL reported a 13 percent rise in quarterly revenue this morning, beating expectations, thanks to higher ad sales. And the company recently sold off most of its stake in Armstrong's struggling passion project, Patch, a network of hyperlocal community websites.

UPDATE: Armstrong sent the following memo to employees shortly before 5 p.m. after news of his earlier comments spread:

AOLers -

As we discussed at the town hall, we care about you and the company – a lot. This morning, I discussed the increases we and many other companies are seeing in healthcare costs. In that context, I mentioned high-risk pregnancy as just one of many examples of how our company supports families when they are in need. We will continue supporting members of the AOL family.

We provide a wide range of benefits – including our 401k plan – and conduct open information sessions each Fall on all available benefits as well as any changes being made. We will continue to do that.

The spirit of the town hall and the spirit of how we choose benefits are the same – we want to be open and transparent about the choices we make and why we are making them.

As I have said over and over again, our employees are our greatest asset. Let’s move forward together as a team. – TA