
AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies” - joshwa
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/06/aol-chief-cuts-401k-benefits-blames-obamacare/
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AceJohnny2
I'm surprised the company (not the insurance) had to pay that much for the
babies medical bills.

I had a friend die to leukemia a year ago (she had just turned 27). 6 months
prior to that, her first month in Stanford Hospital for chemo led to a bill to
the insurance on the order of one million dollars.

I don't know how much the insurance billed the company (a small one without
AOL's income), but they upheld it.

Tim Armstrong is the same CEO who last year fired Abel Lentz, chief creative
officer of Patch, on the spot during his company-wide layout call [1]. I'm
inclined to label him a Gordon Gekko-level psychopath.

[1] [http://www.forbes.com/sites/susanadams/2013/08/14/aols-
chief...](http://www.forbes.com/sites/susanadams/2013/08/14/aols-chief-
demonstrates-the-worst-way-to-fire-someone/)

~~~
VladRussian2
>I'm surprised the company (not the insurance) had to pay that much for the
babies medical bills.

my understanding that AOL self-insures for medical.

~~~
jonknee
Which makes this even more offensive to pass off as increased costs because of
"Obamacare". They were either providing sub-par coverage before or he's lying
about increased costs.

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mattdeboard
There are things you tally in the back of your mind as costs -- like, for
example, a couple of outliers in the health benefit cost spreadsheet that
correspond to newborns with urgent medical needs -- and then there are things
you kinda-sorta bring up to the media as having caused you to cut benefits
back.

It doesn't reflect too well on this guy's people skills if something in his
brain didn't say, "I'm about to blame sick children for cutting my employees'
benefits, maybe I should shut up."

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minimax
_" 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," said
Armstrong_

AOL does something like $2 billion in revenue per year. This cost would have
been a fraction of one tenth of one percent of revenue. What. a. shithead.

~~~
waterlesscloud
He's saying he's cutting 401K matching for people who leave the company during
a given year so that the company can continue paying for extraordinary medical
costs for its employees.

It's a tradeoff, and morally it looks like the right one to me. Pay less to
people who left to the company so you can continue paying more in health
benefits to those who remain.

~~~
Jtsummers
They aren't in a position where they actually need to choose one or the other.
They can do both. Your position (penalize people for leaving before year end)
will hurt the company. The article mentions the financial losses for both the
people that leave (for a multitude of reasons), and the financial loss for
those who stick around. But it's also a destruction of a very useful benefit
that should help the company be competitive in hiring. 401k matching is one of
the major tradeoffs people use for determining which job to take (or stay at).
Now AOL is telling prospective employees: You'd better be loyal or we'll screw
you over.

~~~
waterlesscloud
The financial loss for missing out on compounding of the matching funds for
few months is likely much lower than the financial loss of passing on the
increased cost to the employees.

That was the choice being made here.

~~~
wlievens
It's a dumb choice to even have to make, if your profits are more than enough
to not have to make it.

However it's their right to make it. If they want to run their company into
the ground like that, why not.

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staunch
Old style, hired gun, selfish, cost-cutter CEO with absolutely no original
ideas, or any clue how to turn the company around. It appears AOL's corporate
culture is as out of date as their products.

Why would anyone voluntarily work with someone who's obviously such a shitty
human being? The board of directors must be as bad at their jobs as he is.

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fleitz
Here's the thing, it's a hot market, if you work at AOL, just walk out the
door. It's Feb so you're not missing much contribution.

Or calculate how much you lost by the decision and go ask for a raise for 4
times as much. Tell them you gave $100 to someone down the street because
their baby was sick and so now you need more money because your wife doesn't
like the way the quarterlies are going to look after you spent $200 million at
the bar getting drunk.

~~~
a3n
Now that we don't use CDs to install software anymore, what does AOL produce?

~~~
fleitz
Like Google,Facebook,Yahoo they produce ads / eyeballs, nothing more, nothing
less.

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drawkbox
This is why both healthcare and benefits from employment beyond cash and
salary are many times bad. Companies should have no part in your
healthcare/insurance, retirement savings or any other private aspect beyond
reimbursing you for costs. I think independent pools of healthcare is the only
way, outside of a company, wider nets with less impact.

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jobu
This seems more like a political statement than an actual explanation.

Armstrong pissed away $200 million on Patch, and is still blaming the $7.1
million in Obamacare costs for reducing employee benefits.

~~~
AznHisoka
The sad thing is I know a couple of mommy blogs that get more traffic than
Patch.

~~~
wlievens
That so sounded like a bad yo momma joke.

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jseip
The worst thing about a struggling company is the petty, demoralizing measures
management takes to cut costs. Save a few million in 401k costs but waste
eight figures in decreased productivity, increased employee turnover, and
lower morale overall. This seems shortsighted.

~~~
pmorici
I'm confused as to how this will actually save them any money over time. Won't
it just encourage everyone who wants to quit to wait until the 401k payout
date to the extent possible and then do it all at once?

~~~
jonknee
They could fire a lot of people before the end of the year...

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mkaziz
I feel for those poor women whose colleagues probably know about their
"distressed" babies.

~~~
jonknee
Luckily, thanks to "Obamacare" they can leave AOL and know they will be able
to have affordable insurance.

~~~
NoPiece
They will be able to get insurance, but it won't be affordable.

~~~
a3n
As always, the cost will depend on whether the insured or their s.o. is
employed, and what's been negotiated by the employer. The only thing that the
Affordable Care Act ensures is that an insurance company can't deny insurance.
If you're on your own you're still screwed.

In general, if a law like the _Affordable_ Care Act, or a product, has an
adjective in its name, you won't find that adjective anywhere in the law or
product except right there, in the name.

~~~
jonknee
> The only thing that the Affordable Care Act ensures is that an insurance
> company can't deny insurance. If you're on your own you're still screwed.

Where are you getting this stuff? It ensures a lot more than that... Coverage
minimums, no policy maximums, pre-existing condition coverage, free annual
checkups, etc etc. Pricing is also fixed within age groups except for smoking
(which comes at a standard premium to your age group).

Another part is guaranteed affordability based on income. If you don't make a
lot of money or live in an area where the plans are higher cost you will
quality for a subsidy which brings the price down to an affordable level. If
you make a lot of money the good news is the plan is already affordable.

Before the ACA I could only get a high-deductible plan that never covered a
single thing in the half dozen years I had it. It would have been handy if I
had gotten hit by a bus, but I would run into problems even then because it
had a maximum policy outlay and they had the ability to drop me (then leaving
any remaining medical problems as a "pre-existing" condition for a future
insurer). The only good part about it was the Health Savings Account that
allowed me to pay the exorbitant rates for medical care with pre-tax money.
Without a subsidy I'm paying about the same now (hard to do an exact
comparison without the HSA), but I can actually use the insurance. It won't be
$150+ every time I walk into a doctors office, eye clinic, dentist or
pharmacy.

~~~
a3n
I stand corrected. I look forward to my affordable care when I have to buy on
the open market.

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outside1234
tl;dr: Tim Armstrong is a sociopath. AOL is a terrible place to work. Take
your skills elsewhere.

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ergoproxy
We just saw that big tech firms collude to hold down employee pay! See
[https://news.ycombinator.com/item?id=1699529](https://news.ycombinator.com/item?id=1699529)

That means, in effect, there's only one employer in the tech industry. So the
labor market in tech is not an example of a perfectly competitive market. It
actually follows a monopsony model.

In a monopsonistic labor market, raising wages/benefits doesn't reduce
employment, it actually increases employment, increases output and lowers
prices...all good things! See my comments here for a fuller explanation:
[https://news.ycombinator.com/item?id=7185717](https://news.ycombinator.com/item?id=7185717)

Therefore, Obamacare did _not_ hurt the tech labor market. Tim Armstrong is
full of $hit. They should take away his degree in economics if he really
believes his own bullcrap. He was just covering his own a$$. Maybe what's
hurting his employees, stockholders and customers is his own overblown
$3,216,534 salary in 2011. Source: [http://www.forbes.com/profile/tim-
armstrong/](http://www.forbes.com/profile/tim-armstrong/)

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Bahamut
Sounds like he just hurt his company's prospects for hiring quality employees
here in the DMV area with that crap explanation.

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_delirium
Tim Armstrong already has a reputation as being a bit of a jerk:
[https://news.ycombinator.com/item?id=6197081](https://news.ycombinator.com/item?id=6197081)

Previously, though, he was head of advertising at Google (1999-2009), and I
don't remember him causing much negative publicity in that role.

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anigbrowl
It's not often someones actually makes my skin crawl.

