AOL CAVES: Tim Armstrong Restores The 401K Plans For Employees

AOL is restoring its policy of offering matching 401k contributions to employees without any catches or wrinkles.

In a letter to employees, CEO Tim Armstrong said:

“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.”

For the past week AOL has been dealing with the fallout of changing its 401k policy.

Instead of matching employee contributions to 401k plans when employees invest in their 401k, AOL was planning to match 401k contributions at the end of the year.

This was bad for employees in two ways.

If an employee left mid-way through the year, then the employee didn’t get the contribution.

Or, if an employee stuck around, the employee was missing out on all the gains in the market for the year. So, it was basically a pay cut.

The 401k issue was upsetting enough on its own, but Armstrong made things worse by misspeaking on a conference call with AOL employees. He had a gaffe, and made it sound like he was blaming the 401k changes on Obamacare and two babies.

To illustrate that despite the fact that AOL was changing its 401k policy, it still cared about employees, Armstrong told a story about two women at AOL who had complicated pregnancies. As a result of the extended care for the women, AOL paid $US2 million “above and beyond” what was necessary.

Instead of just saying that though, Armstrong said that Obamacare was going to add $US7.1 million to AOL’s costs. That extra cost plus the costs of supporting unusual cases like the two women who had complicated pregnancies meant AOL needed to find cost savings elsewhere, and so AOL was changing its 401k to protect itself.

To employees it sure sounded like Armstrong was blaming two women for changes to the 401k.

Sources at AOL close to senior management insisted that Armstrong just goofed and he never meant to blame employees.

Whatever his intentions, AOL’s staff went into a state of revolt. Employees were sending letters to Armstrong, and AOL’s Huffington Post was giving it big coverage.

As a result of the outcry, Armstrong changed his mind and is restoring the matching 401k.

Here’s Armstrong’s letter:

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