This past week should have resulted in a great week for Tim Armstrong the CEO of AOL after the company’s earnings for the quarter were announced as the best for the past decade.
However, his comments angered his employees, insulted those with sick infants and exposed the practice that is seeping into corporate America threatening to rob workers of their 401(k) savings.
The turn of events started on Tuesday, when AOL employees started to learn that the company was switching its 401(k) to match an annual one-time sum, rather than it distributing money throughout the course of the year with each paycheck as it has done prior to now.
Only those employees remaining with the company through December 31 are eligible, which means anyone leaving during the midyear will not see any of the monies.
More and more companies, including IBM and Deutsche Bank, have been reducing their benefits for retirement in this manner, saving companies millions of dollars at the same time more American workers are relying on their 401(k) primarily due to traditional pensions being phase out.
The latest changes have undercut part of the central virtue of the savings system, which should in theory make it easier for the employees to change companies and take the 401(k) plan with them. However, with job changing taking place more often during an employee’s career, the losses in matches can added up to many thousands of dollars every time an employee switches jobs.
Many employees at AOL were not aware of the new policy on 401(k)’s at the company until an article reported about it in the Washington Post.
At first, CEO Armstrong blamed the new law in healthcare for the changes. However, he then added that another reason was that two workers in 2012 had distressed babies, with each costing AOL $1 million.
Those remarks infuriated employees and caused a large amount of criticism across social media sites online.
Experts in retirement say the new system hurts those leaving midyear as well as those who stay, since they lose compounding benefits of more money being put in their accounts during the course of the year.
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