Friday, February 7, 2014

AOL cuts benefits, blames Obamacare and Complications during Pregnancy

  @Luhby February 6, 2014: 6:03 PM ET
AOL CEO: Obamacare leads to 401(k) cut
NEW YORK (CNNMoney)

AOL became the latest company to blame Obamacare for cutting back on employee benefits.

The tech firm will now pay its 401(k) company match only to employees who are active on Dec. 31 of that year, as opposed to in their paychecks throughout the year. So those who leave the company before the end of the year will forfeit the match.

AOL (AOL) CEO Tim Armstrong blamed $7.1 million in additional Obamacare costs the company is facing this year. Had the company not made the change in its 401(k) payments, employees would have seen their health insurance costs increase, he told CNN Thursday.
Armstrong did not provide a lot of specifics about what aspects of Obamacare were pushing up the company's health care costs, but said it was one factor affecting the 401(k) restructuring.
"The Obamacare Act and some of the changes that happened there had increases in our health care costs," Armstrong told CNN. "We had to make a choice whether we pass those on or whether we took other benefits and reduce them."
Some employees will still see their premiums rise, depending on the plan they picked, though AOL "ate a huge piece of the increase."
The news came on a day when AOL announced 2013 was "its most successful year in the last decade," reporting revenues of $2.3 billion.


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AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies”

AOL chief executive Tim Armstrong blames the new health care law for why his company has made a major change to its 401(k) benefits. (Photo by Pete Marovich/Bloomberg)
AOL chief executive Tim Armstrong blames the new health care law for why his company has made a major change to its 401(k) benefits. (Photo by Pete Marovich/Bloomberg)
AOL chief executive Tim Armstrong Thursday offered a number of unusual explanations for why his company pulled back its 401(k) benefits for employees this year. The first reason: Obamacare. The second: two women at the company who had "distressed babies" in 2012.
The stock, which reached $51 on Thursday morning because of a good earnings release by AOL, fell to 47.15 by the end of regular trading. It's down another 2.5 percent Friday.
How did this mess begin? The Washington Post reported Tuesday that AOL quietly made a major change to its 401(k) plan by switching its match to a lump sum at the end of the year, rather than contributing with every paycheck. The benefit is only available to employees who are still active on Dec. 31.

Retirement experts widely agree that the change hurts all employees--not just those who leave mid-year--since savers miss out on the benefits of investing more money throughout the year, a strategy known as “dollar cost averaging.”
When he was asked on CNBC this morning why AOL was making the change, Armstrong said it was to spare employees from what he described as the added costs of Obamacare.
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