AOL CEO: Obamacare Will Cost Us $7 Million [Video]

AOL CEO Tim Armstrong has announced that Obamacare health insurance costs will force the company to restructure its 401(k) employee retirement plan.

Armstrong seems to be suggesting that Obamacare, a.k.a. the Affordable Care Act, is nearly unaffordable for AOL.

From now on, the company, which also owns The Huffington Post, will pay out its 401(k) match in a lump sum on December 31, which means that any employee who quits, gets fired, or is laid off before the end of the year won’t receive the employer contribution in his/her account.

This adjustment in the 401(k) program match may also have ramifications for AOL workers who stay put: “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.'”

Separately, in late January, the unprofitable AOL Patch hyperlocal news service reportedly laid off up to 90 percent of its workforce.

In an appearance on the CNBC “Squawk Box” show, Armstrong revealed that the mandated, one-size-fits-all Obamacare health insurance benefits will increase company benefits costs by more than $7 million.

Said Armstrong:

As a company, we’re probably in the most intense talent space in the world, and so we have to look at our benefits programs very seriously. As a CEO/chair, let me give you an example of the decisions we have to make as a company. Obamacare is an additional $7.1 million dollar expense for us as a company, so we have to decide whether or not to pass that expense to employees or whether to cut other benefits. 401(k) matching programs are an added benefit above and beyond — all of our current employees have that and all of our current employees who stay with us will have that, a three percent match; it’s a great program, in general.”

Continued Armstrong:

But as a CEO and as a management team, we have to decide: Do we pass the $7.1 million of Obamacare cost to our employees? Or do we try to eat as much of that as possible and cut other benefits? For employees leaving to go to other employers, not matching those programs was probably the last thing on the list for us in terms of employee benefits that we wanted to keep.”

In a so-called town meeting with employees yesterday, Armstrong apparently explained that the change in the 401(k) distribution was a way to avoid passing the additional Obamacare costs on to AOL workers. During the town meeting, he also reportedly claimed that the difficult pregnancies of two AOL employees cost the company an additional $2 million.

In late January, Target became the latest employer to drop health insurance benefits for part-time employees, thereby sending affected workers into the Obamacare exchanges to find coverage. In the runup to 2015 when the postponed employer mandate kicks in, millions of workers will likely encounter major disruptions in their existing workplace-based coverage including higher premiums, co-pays, and deductibles, and possible changes to their access to existing provider networks. In this complicated environment moving forward, some employers may decided to abandon health insurance benefits for full-timers too.

Setting aside the AOL Obamacare 401(k) situation, in general some corporate executives are greedheads, and pre-Obamacare, dealing with health insurers created a lot of shall we say heartburn for employers and employees alike. But it’s hardly a strong endorsement of Obamacare as its proponents contend that since the health insurance system was bad before, it doesn’t matter if things get worse under the Affordable Care Act. In other words, hating on corporate America and the insurance industry may be justified in some or many instances, but Obamacare is hardly making things better.

This week, the Congressional Budget Office (CBO) — which often tends to underestimate the full implications of federal programs — claimed that Obamacare would result in cuts to the full-time workforce by 2.5 million persons, primarily because the Obamacare taxpayer-supported insurance premium subsidy provides a disincentive for people to increase their earnings by working more.

Added: Armstrong’s reference to what he called “distressed babies” has gotten the AOL CEO in some hot water: “The comments, first reported by Capital New York, sparked indignation among employees and on social media, where many accused the CEO of using the infants as cover for an unpopular decision and questioned the propriety of his singling out two workers, while others worried that the less-generous 401(k) plan could spark other companies to follow suit.” In a subsequent memo, Armstrong reaffirmed that the company would continue to support families of AOL employees when they are in need.

[image credit: Yaniv Golan]