February 7th, 2014
09:32 PM ET

AOL CEO blames 401k cuts on "Distressed Babies," then apologizes

OutFront Update:

Complaints from AOL employees have led CEO Tim Armstrong to put the breaks on changes to his company's 401(k).

Armstrong announced the reversal in a staff e-mail Saturday.

He apologized in the memo for comments made during an employee conference call "when I mentioned specific healthcare examples in trying to explain our decision making process around our employee benefit programs."

Armstrong did not cite his controversial comments made during the company conference call, but according to an AOL spokesman, the CEO contacted the two families he was referring to and apologized for the 'distressed babies' remark.

Deanna Fei, the mother of a "distressed baby,"  will be a guest on Erin Burnett OutFront at 7pm ET on CNN.

OutFront Friday:

Can a co-worker's pregnancy hurt your 401(k) plan?

AOL CEO Tim Armstrong is blaming additional Obamacare costs the company is facing this year with have to make cuts in retirement benefits.

AOL is cutting 401(k) contributions for some employees that leave the company before the end of the year, and told CNN's Poppy Harlow that is due, in part, to Obamacare.

Armstrong was more specific on an employee-wide conference call. According to a transcript of the call that an AOL staffer gave Capital New York, Armstrong said:

"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 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."

On Thursday, AOL announced 2013 was its most successful year in a decade - reporting revenues of $2.3 billion.

CNN's Erin Burnett asked Venture Capitalist and an investor on "Shark Tank", Kevin O'Leary - how two complicated pregnancies justify cutting the 401(k) for the company.

“The rules of health care and how we pay for them are now different. We know that because of the new law. This the beginning of a very long and difficult period of implementation to this law," O'Leary said.

O'Leary tells Burnett that the Affordable Care Act or Obamacare impacts the financial cost of health care and companies like AOL has to make changes.

Filed under: News • Tech
soundoff (One Response)
  1. Collin LaMey

    Evidently Erin Burnett, this CEO is trying to cut the matching contributions his company makes to the employees 401K plans and he is scapegoating Obamacare. First and foremost, his company is too large to be impacted by Obamacare since job based plans are grandfathered away from Obamaxare at this time, meaning whatever plan he currently has he can keep it as is. Even if he adds new employeeds, they can be enrolled as if Obamacare dud not exist. Obamacare considers a company with 50+ employees to be a large emplouyer. The only way he could be impacted is down the road if the company significantly changes the current plan to impact its employees adversely then they would lose their grandfather status. Because Obamacare is new and somewhat complicated to a person who does understand how to break dowm an Insurance contract, people are distorting the facts. But they cant fool all of the people all of the time. Peace!!!

    February 8, 2014 at 2:16 am | Reply

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