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AOL Reverses Course On 401K Match; CEO Apologizes
An anonymous reader writes "When we last checked in with Tim Armstrong, the AOL CEO was demonstrating 'Leadership with a Capital L' to employees of the company's Patch local news subsidiary by summarily firing an employee in the middle of a conference call for taking photos. Armstrong continued to serve up tasty material for tech bloggers this past week, blaming $7.1 million in extra expenses from Obamacare, and for $2 million in expenses for 'two AOLers that had distressed babies', for a decision to hold all matching funds for employee 401K programs until the end of each calendar year. After a small firestorm in the press, and a petition from AOL employees unhappy with both the policy change and the way it was presented, Armstrong reversed course, reinstating the per-period match and apologizing for mentioning the individual employee cases (TechCrunch is an AOL subsidiary). Incidentally, Armstrong was originally following in the footsteps of IBM, which made similar changes to its 401K program that went into effect last year."
Sounds like the ideal candidate.
I like AOL. It started the internet super-highway after all, and if not for it, we would all be on modems, gets our software by CD, yada-yada-yada.
How does this lead to two million dollars in expenses? Is he running his own insurance company for the employees?
It's possible. Self-insurance is a thing a lot of companies do. Granted that typically doesn't happen in health insurance, but it is possible.
It's slightly more likely that their insurer jacked up it's rates due to increased costs, or jacked up rates for no reason and claimed it was due to those costs.
What's most likely is that somebody told him about the "distressed babies," and he used that as a rationalization for being a dick on the 401ks.
Um, yes. It's called "self insurance". For a large company, they will often outsource the administration to a regular insurance company but they pay the medical bills out of the company pocket. It makes sense because with ten thousand employees, you have enough of a pool to lessen the statistical variation percentage wise. So some years you spend a few percent more and some a few percent less. Insurance charges for this statistical pooling so the company can save money. I guess there were a couple of outlier expenses that broke the average. CEO shouldn't complain - while he expected cost savings, he agreed to take the risk.
Yoghurt
um whoever is doing submission checking should at least check that your not copying the ENTIRE summary from techcrunch... hence the subsidiary notice
Guys sort it out otherwise your going to get in trouble with lawyers and users !
John Jones
It's really easy for them to go away when a couple companies (like IBM) get cheap, the rest else declare the new cheapness to be the industry standard; and everyone gets screwed. If the CEO is sufficiently dickish you can win one or two battles like this one; but unless every single job applicant asks about a specific benefit before taking the job they might change their minds; and if the government forces them to stop cutting benefits they will; but most of the time that shit just doesn't work. Hell most beneficiaries of 401ks probably don't know whether their company matches their contributions annually or per pay period.
OTOH if there's just one government program (like Social Security or Medicare), then everyone knows exactly what Congress is doing about it, and you can't screw beneficiaries without everyone knowing it.
There are some who argue that the 401k is a bad investment option.
http://www.fa-mag.com/news/the...
But note that by only disbursing matching funds on December 15th, IBM twists the arms of its employees to plan separation from the company at the most difficult time of transition. Right during the holidays and then a dead point for hiring in mid winter. They also incentivize employee harassment and unfair terminations prior to Dec 15th in order to cut costs by keeping what would have been 401k disbursements. And of course the funds are kept in an interest bearing or investment account controlled by the firm for a year, meaning those gains are lost to the employee.
I'd call that a terrible policy and one that any potential employee should carefully consider. Not only does it represent lost potential 401K gains, but much worse, it's an indication of how poorly management at the firm views its employees. Real 'company store' type stuff.
I believe there are companies that are using the excuse of the Affordable Care Act to lower benefits and thus save costs. If AOL hadn't used the excuse of the AFA then it would have been some other excuse. I don't suppose anyone saw the interview withe AOL CEO? Jeez that was an aweful looking work environment. There must have been a thousand people all sitting in from of keyboards on row after row of very long tables. The only interaction a person seems to have are to the person left or right of themself. I also noticed nearly everyone seemed to have their lunch in front of them (evidenced by take-out bags, a dish etc in view). Many tech workers any more are being asked to work like senseless drones at their jobs. I don't know where AOL employee satisfaction ranks but I see that AOL is NOT listed in the top 100 companies to work for in 2014: http://jobs.aol.com/articles/2...
Um, yes. It's called "self insurance". For a large company, they will often outsource the administration to a regular insurance company but they pay the medical bills out of the company pocket. It makes sense because with ten thousand employees, you have enough of a pool to lessen the statistical variation percentage wise. So some years you spend a few percent more and some a few percent less. Insurance charges for this statistical pooling so the company can save money. I guess there were a couple of outlier expenses that broke the average. CEO shouldn't complain - while he expected cost savings, he agreed to take the risk.
http://safetynational.com/company.html?coinfo=Self-Insurance%3A+How+it+works All states allow and most require them to purchase coverage that "limits the amount a self-insured pays for claims from any one occurrence." So state regulations actually prohibited the AOL CEO from taking on too much cost risk in this area. TL;DR - he's a bleeding liar to suggest the two events were related.
On Gawker, Sam Biddle points out that while AOL claimed it couldn't afford its old retirement plan, it is able to afford "Shingy," who Biddle describe as a "professional nothing". Shingy's job title is "Digital Prophet," which means "he's gloating about the fact that he has a make believe job at AOL, unlike most tech charlatans, who try to conceal it":
This Man Is Representing AOL on Live Television
CEO pay is also an outlier, what's his plan about it?
"CEO shouldn't complain - while he expected cost savings, he agreed to take the risk."
He also shouldn't complain because it makes him look incompetent (not that he is likely to even capable of experiencing the feeling of being seen as incompetent, of course). Apparently AOL has something in the neighborhood of 5,500 employees. I suspect that they skew young and reasonably healthy; but modest yearly changes in who's on chemo in a given year could trivially add up to 2 million+ swing. It's a big scary number; but it's only about a dollar per employee per day, across a population of that size.
If that qualifies as big, scary, risk, either you suck at risk management, your company has near-lethal liquidity problems, or various other bad things.
From the WSJ:
The compensation of AOL Inc. AOL +0.28% 's chief executive, Tim Armstrong, nearly quadrupled in 2012 to $12.1 million, from $3.2 million in 2011
So by cutting his own pay by $10M, he could more than compensate for the $9.1M in extra expenses he claims. It would also bring his compensation into line with global standards. US CEO pay is somewhere around 400x the average employee's. The UK is a very distant second with around 45x. In almost every other developed country, it's between 10x and 20x. Very generously assuming that average employee compensation at AOL is $100k, $2.1M would put him at the generous end of global standards.
Eat the rich!
They probably taste lousy. I'd settle for the oppressive treatment they received in the radical days of the Eisenhower administration.
I wish people had a better understanding of history. Calling for a return to the tax structure (up to 90% on the wealthy's incomes), the percentage going to employee compensation, etc., that we had in the 1950's probably would get me branded a "socialist" (by people who don't even understand what the word means). Yet that's what we had in those idyllic Ozzie and Harriet days that so many, including the right wing, see as a lost golden era.
I believe this is talking about the company *matching* your contributions.
Obviously. Did anybody say otherwise?
In IBM's case, when I worked there, they matched up to 6% which is pretty damn generous.
6%. God bless their generosity. Wanna compare that to what it used to cost them for a defined benefit pension plan? Keep squeezing the peasants and they start to accept it as the new normal.
BTW, did you get laid off, or did you choose to leave? If you chose to, was it because you saw the handwriting on the wall?h
Actually, most large companies are self insured. They will farm out the “operations” part (billing, negotiating rates, etc.) to a insurance company but will pay all of the costs out of their own pocket.
I guess I was wrong. Sorry.
Interesting, he raises his own pay by 10 million dollars and then blames Obamacare for 7 million dollar increase in "costs". Even if what this inveterate liar is saying is true, it works out to less than 2 bucks a day per employee.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Here's the citation, for anyone interested: http://online.wsj.com/news/articles/SB10001424127887324103504578372342066362234
The best thing about UDP jokes is I don't care if you get them or not
It sounds to me like AOL and IBM need a union. Bonus; if they trick some poor guy from India into coming over and working for them on a H1B, I bet the union could figure out how to hold the H1B if he ever decides to try to find other work.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
I like AOL. It started the internet super-highway after all, and if not for it, we would all be on modems, gets our software by CD, yada-yada-yada.
AOL spared users the complexities of the Internet Suite of the '90s.
I still have the boxed set of manuals from Delrina. Clients for Telnet and BBS services, FTP. Archie Veronica, Gopher, IRC Chat, Usenet, a Browser, basic photo editing tools, compressed file management and so on.
AOL's clients were written for use by ordinary mortals. They played nice with third party software like mIRC.
GUI. Automatic updates. Fixed price monthly billing. Thousands of local access toll-free numbers. There was a lot to like about AOL and it is past time the geek got off his high horse and admitted it,
So you have 1 friend. Big deal.
Sleep your way to a whiter smile...date a dentist!
it's not even necessarily just large companies that do this. my mother is a partner in a small CPA firm with about a dozen partners total, and about 50 employees total. now granted it is a total disaster because of many "distressed" old men in poor health sky rocketing their costs, but they do the same thing. they pay for it.
That thing still around?
I'm still on hold trying to cancel my account.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
Calling for a return to the tax structure (up to 90% on the wealthy's incomes), the percentage going to employee compensation, etc., that we had in the 1950's probably would get me branded a "socialist" (by people who don't even understand what the word means). Yet that's what we had in those idyllic Ozzie and Harriet days that so many, including the right wing, see as a lost golden era.
More likely it would just get you branded as an idiot. You might want to keep in mind, in the 1950's the US was the only game in town. Europe was recovering from 2 world wars, made in Japan was synonymous for cheap junk, Korea was in the midst of a civil war, and China and India were mostly known for mass famines. If you wanted to play in the big leagues, you played in the US.
Try charging those kind of tax rates now, and see if you can count to 10 before a major amount of capital flees to friendlier shores.
American Third Position
Finally, a real choice!