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Apparently Two Women Getting Pregnant Bankrupted AOL

ONW

ONW

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"The surprising news in this case is that AOL's chief executive, Tim Armstrong placed blame for the cuts on Obamacare, which he says would cost the company $7 million, and two female employees with "distressed babies" that cost $2 million in 2012.

The change in the 401(k) program means AOL will dole out its matching funds to employees' contributions in one lump sum at the end of the year, rather than match contributions in each paycheck. The employee must wait till December 31 to get the matching funds, and won't receive the money if he or she leaves midyear.

Here's why two newborns and the costs of Obamacare are unlikely to be the reasons that AOL changed its 401(k) program:"

http://www.cnn.com/2014/02/08/opinion/roby-armstrong-obamacare/index.html?hpt=hp_t4

How do you define "distressed babies" btw?
 
Accountants and attorneys,

Is this legal? Are they deducting what they would have matched month-to-month for their taxes? Do the employees have a claim that interest, inflation, opportunities lost affected their year end lump sum without agreeing to it? If other companies choose to adopt this practice, what are the ramifications to employer and employee?
 
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How would it be illegal? Have we reached the point where we think we're entitled to an employer contribution to our 401(k)s?
 
Are you an attorney or an accountant? Before you derail this thread, the adults in the room are asking legitimate question and trying to understand what this decision could mean in the future without going political dipshitery.
 
EatLeadCommie said:
How would it be illegal? Have we reached the point where we think we're entitled to an employer contribution to our 401(k)s?
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Seriously, I'm looking to better understand this decision and its affects.
 
I am not a benefit plan expert, but I believe it is acceptable to match 401K contributions at the end of the year as long as the plan document has been amended to allow for the switch. The employees have no rights to the match until it vests. Alot of plans have vests where a percentage of the match becomes the employee's property on a schedule based on years of service. Unless the employees have a collective bargaining agreement, they have no rights to direct company policy.

You get the deduction in the tax year the cash is transferred to the plan but accrual taxpayers can generally deduct contributions made within 2 1/2 months after year end for deferred compensation accrued for in the prior year.
 
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yet everyone still asks, does AOL still exist? That seems to be a much bigger issue than Obamacare.

ETA: Apparently they still make $500 million a year profit off their dial up services. This just seems like more blame game stuff to cut costs.
 
I just googled to see what the specific changes were to AOL's 401k. I happened to find this update just a few minutes ago that they're going to continue with their old plan, with matching.

http://www.usatoday.com/story/money...-sum-yearend-401k-match-hurts-savers/5313943/

I don't know the specifics of what AOL was going to change, but if they eliminated the employer match and went with a straight-up profit sharing plan, then yes, this is 100% legal. I think the main reason you don't see it is because it's cheaper to do the match than the profit sharing, probably. That's because with a pure profit sharing, they'd have to contribute to all participating employees, even if they didn't contribute any money of their own. With matching contributions, they don't have to make any for employees that elect to not contribute their own money.
 
In a move to rein in retirement plan costs, IBM announced changes to its 401(k) defined contribution plan in December 2012. Starting in 2013, the company will no longer match employee contributions made via paycheck deferrals throughout the year. Instead, it will make a cumulative, end-of-year lump-sum matching payment into employees' 401(k) accounts, typically matching employee contributions up to 6 percent of pay. Plan participants who terminate employment before Dec. 15 will not qualify for the match unless they reached normal retirement age when leaving the firm.

Thanks for the link Chris. It sounds like IBM did this a year ago to minimize retirement plan costs. If anyone knows, does the employee still make contributions each month, or do they also make a lump sum contribution to match the employer's contribution at the end of the year.
 
ONW said:
In a move to rein in retirement plan costs, IBM announced changes to its 401(k) defined contribution plan in December 2012. Starting in 2013, the company will no longer match employee contributions made via paycheck deferrals throughout the year. Instead, it will make a cumulative, end-of-year lump-sum matching payment into employees' 401(k) accounts, typically matching employee contributions up to 6 percent of pay. Plan participants who terminate employment before Dec. 15 will not qualify for the match unless they reached normal retirement age when leaving the firm.

Thanks for the link Chris. It sounds like IBM did this a year ago to minimize retirement plan costs. If anyone knows, does the employee still make contributions each month, or do they also make a lump sum contribution to match the employer's contribution at the end of the year.
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The employee would still make their deferral each payroll period.
 
ChrisL68 said:
The employee would still make their deferral each payroll period.
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Is the company investing that money and paying interest to the employee during that period?
 
ONW said:
Is the company investing that money and paying interest to the employee during that period?
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One would assume that money is being deposited into their 401(k), which is then invested by whomever is managing that account. The company isn't holding onto the employee contributions until the end of year.
 
Liquid Karma said:
One would assume that money is being deposited into their 401(k), which is then invested by whomever is managing that account. The company isn't holding onto the employee contributions until the end of year.
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But technically they could be profiting from the cash flow?
 
Liquid Karma said:
One would assume that money is being deposited into their 401(k), which is then invested by whomever is managing that account. The company isn't holding onto the employee contributions until the end of year.
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There are very specific rules that require employee 401K withholding to be deposited into their 401(K) accounts in a very tight timeframe. If they aren't then the company is required to make the employee whole with any investment returns they might have missed.

Not a current expert, but back in my audit days I used to audit these bad boys.
 
The biggest savings I believe is for employees that leave the company before the end of the year. They get nothing. So you then expect exodus in January after the match and that is exactly what happened in year 1 of this for IBM. It is a bloodbath in the Silicon Valley for them.
 
Didn't know women could give birth to these:

aol.jpeg
 
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