If you thought that healthcare benefits were going to be the only casualty of the “let’s pass it so we can see what’s in it” healthcare plan known as Obamacare, you were woefully uninformed. Chalk the latest corporate trend up to finding out what’s in the Obama, Pelosi & Reed Affordable Care Act now commonly known as Obamacare.
Tim Armstrong CEO of AOL blamed the change to the company’s 401(k) program on the new Obamacare during an interview with CNBC. Armstrong explained “Obamacare is an additional $7.1 million dollar cost for us as a company, so we have to decide whether or not to pass that expense on to employees”
This week AOL instituted and then reversed a decision to punish employees who leave the company before the end of the year. IBM led the way by changing its 401(k) system in 2012 to hand out employee matches in one lump sum at the end of the year. Employees who leave the company before Dec. 15 do not see any matched dollars unless they are retiring. This means that employees will miss out on all the compounding interest throughout the year from the contributions.
Proponents of these changes say it's a way of saving millions of dollars and encouraging employees to stay through the end of the year. In an environment where Obamacare is adding costs to the operation of corporations this change is one way of offsetting those costs.
Critics claim that the onetime lump sum is troubling because a 401(k) is better suited than traditional pensions to a world in which workers change jobs multiple times. With 401(k)’s employees can roll-over their retirement savings from one company to another. However, if the trend continues to switch to matching contributions annually, the system will punish those who change employers mid-year. Indeed, with every job change over time, the loss of a few months' contributions can amount to years.
AOL’s chief Tim Armstrong announced a reversal of the policy change in an email to employees on Saturday February 8, 2014. Armstrong wrote: “The leadership team and I listened to your feedback over the last week,” and “We heard you on this topic. And as we discussed the matter over several days, with management and employees, we have decided to change the policy back to a per-pay-period matching contribution.”
Other companies are following the IBM model and in 2015 the banking giant Deutsche Bank will not pay out matches for U.S. employees who are still at the company until Dec. 31.
“We remain committed to continuing to invest in our employees’ retirement and have maintained our 401(k) match,” Deutsche Bank spokeswoman Mayura Hooper said. “With that said, in a rising cost environment, these types of changes are necessary for businesses to stay competitive.”
Other companies have followed suit such as Charles Schwab and Advocate Health Care, the largest health system in Illinois.