AOL Blames Obamacare For Changes To Retirement Benefits

Tech giant AOL is trimming its employee retirement benefits. It will stop depositing matching funds into employee 401(k) accounts each pay period. Instead it will make one annual lump-sum deposit at the beginning of the year. The company blames costs associated with the Affordable Care Act.

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DAVID GREENE, HOST:

And let's hear now from the CEO who says Obamacare forced his hand when it comes to employee benefits. Tim Armstrong, the CEO of tech giant AOL, said the company had to change the way it matches the deposits employees make to their retirement accounts.

NPR's Richard Gonzales has more.

RICHARD GONZALES, BYLINE: Armstrong told CNBC that company costs due to Obamacare left him with a tough decision.

TIM ARMSTRONG: Do we pass the $7.1 million of Obamacare costs to our employees or do we try to eat as much as of that as possible and cut other benefits?

GONZALES: Beginning next year, AOL will stop depositing matching funds into its employee's 401(k) plans every pay period. Instead, the company will make one annual lump sum deposit at the beginning of each year.

AOL matches up to 3 percent of an employee's annual salary.

The move penalizes employees who stop working AOL before they receive their annual matching deposit. They could to lose thousands of dollars they might otherwise have earned.

The move also scales back one of key advantages of 401(k)s, what's known as dollar-cost averaging. That means employees, as investors, lose the ability to buy stocks and bonds at regular intervals, thus reducing their risk.

The benefits change also comes as AOL announced that its fourth quarter revenues were up 13 percent from a year earlier.

Richard Gonzales, NPR News, San Francisco.

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