AOL Reverses Course On 401K Match; CEO Apologizes 123
An anonymous reader writes "When we last checked in with Tim Armstrong, the AOL CEO was demonstrating 'Leadership with a Capital L' to employees of the company's Patch local news subsidiary by summarily firing an employee in the middle of a conference call for taking photos. Armstrong continued to serve up tasty material for tech bloggers this past week, blaming $7.1 million in extra expenses from Obamacare, and for $2 million in expenses for 'two AOLers that had distressed babies', for a decision to hold all matching funds for employee 401K programs until the end of each calendar year. After a small firestorm in the press, and a petition from AOL employees unhappy with both the policy change and the way it was presented, Armstrong reversed course, reinstating the per-period match and apologizing for mentioning the individual employee cases (TechCrunch is an AOL subsidiary). Incidentally, Armstrong was originally following in the footsteps of IBM, which made similar changes to its 401K program that went into effect last year."
New CEO for Dice? (Score:5, Funny)
Sounds like the ideal candidate.
Re:Distressed Babies? (Score:5, Interesting)
How does this lead to two million dollars in expenses? Is he running his own insurance company for the employees?
It's possible. Self-insurance is a thing a lot of companies do. Granted that typically doesn't happen in health insurance, but it is possible.
It's slightly more likely that their insurer jacked up it's rates due to increased costs, or jacked up rates for no reason and claimed it was due to those costs.
What's most likely is that somebody told him about the "distressed babies," and he used that as a rationalization for being a dick on the 401ks.
Re: (Score:1, Informative)
It's the other way around. Now the government owns the losses (funding the insurance subsidy, Medicaid expansion, etc.) and private insurers, drug-makers, hospitals, etc. keep the profits.
That's not socialism*. It's corporate welfare.
* (At least, not socialism as it was defined before Fox News took over the duty of defining "socialism and "communism" to mean "anything Obama does").
Re: Socialism isn't what you think it is. (Score:1)
I think you need to research how government-mandated insurance works... The government doesn't make a dime off the insurance companies. And socializing would mean the exact OPPOSITE of what you claim - socializing would make the GOVERNMENT own the liabilities, and the PEOPLE own the profits.
Note: I'm not saying that socialism is good - mostly because "pure" socialism has never happened. Nor has "pure" communism. Every country that claimed to be communist ended up as a dictatorship under the veneer of com
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I think you need to research how government-mandated insurance works... The government doesn't make a dime off the insurance companies.
"The government" may not make any money off of insurance companies, but lawmakers sure do.
Re:Distressed Babies? (Score:4, Insightful)
Actually, most large companies are self insured. They will farm out the “operations” part (billing, negotiating rates, etc.) to a insurance company but will pay all of the costs out of their own pocket.
Re: Distressed Babies? (Score:2)
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This is actually a smart idea if you can fund and manage the accounting for it properly. It allows your company to take portions of it's profit pretax and pay itself while investing it under the guise of insuring the employees. Some creative accounting can even juggle losses a bit to create tax benefits.
Of course the problem with bean counters is that not only can they manage it properly, they look for ways to save expenses like getting rid of lower level employees that are using the system too much. But th
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According to Internal Revenue Bulletin: 2012-14 states in part
http://www.irs.gov/irb/2012-14... [irs.gov]
This means that you cannot purchase spare parts or materials in order to defer income for the year. This stops a business from purchasin
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They most certainly are benefiting under the Affordable Care Act. They are guaranteed not to lose money as provisions have been built into the law in order to compensate for any losses.
There are a lot of things in the PPACA that don't need to be there. There are some that do. I guess the question might be do we toss the baby out with the bath water for being evil or not?
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How does this lead to two million dollars in expenses? Is he running his own insurance company for the employees?
It's possible. Self-insurance is a thing a lot of companies do. Granted that typically doesn't happen in health insurance, but it is possible.
It's slightly more likely that their insurer jacked up it's rates due to increased costs, or jacked up rates for no reason and claimed it was due to those costs.
What's most likely is that somebody told him about the "distressed babies," and he used that as a rationalization for being a dick on the 401ks.
My previous employer was self-insured, a fact that they liked to remind us of each year when premiums went up. But even self-insured companies can purchase reinsurance to back catastrophic losses.
Re:Distressed Babies? (Score:5, Informative)
Um, yes. It's called "self insurance". For a large company, they will often outsource the administration to a regular insurance company but they pay the medical bills out of the company pocket. It makes sense because with ten thousand employees, you have enough of a pool to lessen the statistical variation percentage wise. So some years you spend a few percent more and some a few percent less. Insurance charges for this statistical pooling so the company can save money. I guess there were a couple of outlier expenses that broke the average. CEO shouldn't complain - while he expected cost savings, he agreed to take the risk.
"Excess insurance coverage" (Score:4, Interesting)
Um, yes. It's called "self insurance". For a large company, they will often outsource the administration to a regular insurance company but they pay the medical bills out of the company pocket. It makes sense because with ten thousand employees, you have enough of a pool to lessen the statistical variation percentage wise. So some years you spend a few percent more and some a few percent less. Insurance charges for this statistical pooling so the company can save money. I guess there were a couple of outlier expenses that broke the average. CEO shouldn't complain - while he expected cost savings, he agreed to take the risk.
http://safetynational.com/company.html?coinfo=Self-Insurance%3A+How+it+works [safetynational.com] All states allow and most require them to purchase coverage that "limits the amount a self-insured pays for claims from any one occurrence." So state regulations actually prohibited the AOL CEO from taking on too much cost risk in this area. TL;DR - he's a bleeding liar to suggest the two events were related.
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> he's a bleeding liar to suggest the two events were related.
No, he's not. I've been digging into this story a bit. This is what I believe to be true based on piecing together comments in several forums: AOL is self insured. They had acceptable risk levels. But they had events that blew away their risk assessments. They're having to reclassify their insurance, and that means higher cost for the system next year.
So, true, they didn't have to pay out for these two events. But they are going to have to pa
Re:Distressed Babies? (Score:4, Insightful)
Re:Distressed Babies? (Score:5, Interesting)
From the WSJ:
The compensation of AOL Inc. AOL +0.28% 's chief executive, Tim Armstrong, nearly quadrupled in 2012 to $12.1 million, from $3.2 million in 2011
So by cutting his own pay by $10M, he could more than compensate for the $9.1M in extra expenses he claims. It would also bring his compensation into line with global standards. US CEO pay is somewhere around 400x the average employee's. The UK is a very distant second with around 45x. In almost every other developed country, it's between 10x and 20x. Very generously assuming that average employee compensation at AOL is $100k, $2.1M would put him at the generous end of global standards.
Re:Distressed Babies? (Score:5, Insightful)
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It also seems odd that a business with largely white collar employees was providing them with less coverage than the ACA minimum.
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Its not hard to find your old coverage is less than the ACA minimum because things like birth control for Senors of cervical pap smears [wikipedia.org] for your male child are not items commonly sought after in insurance before the ACA. There are also some specific taxes that are imposed on employers as well as insurers built into the ACA. Any number of these things could be why the cost is raising and not necessarily less coverage than the ACA outside of a few things that weren't common before the law.
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Well Pablo Picasso fathered Paloma when he was 68, not that he would have used birth control had it been available through his medical insurance plan, but since you mentioned it ..
As for the "cervical pap smears for your male child", would you mind very much if I asked you to provide a citation? This sounds like a very interesting bit of arcania if it is true, though I doubt that it's true.
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Here's the citation, for anyone interested: http://online.wsj.com/news/articles/SB10001424127887324103504578372342066362234 [wsj.com]
Re:Distressed Babies? (Score:5, Interesting)
He also shouldn't complain because it makes him look incompetent (not that he is likely to even capable of experiencing the feeling of being seen as incompetent, of course). Apparently AOL has something in the neighborhood of 5,500 employees. I suspect that they skew young and reasonably healthy; but modest yearly changes in who's on chemo in a given year could trivially add up to 2 million+ swing. It's a big scary number; but it's only about a dollar per employee per day, across a population of that size.
If that qualifies as big, scary, risk, either you suck at risk management, your company has near-lethal liquidity problems, or various other bad things.
Cue AOL railing . . . (Score:5, Funny)
I like AOL. It started the internet super-highway after all, and if not for it, we would all be on modems, gets our software by CD, yada-yada-yada.
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I like AOL. It started the internet super-highway after all, and if not for it, we would all be on modems, gets our software by CD, yada-yada-yada.
Yeah... Sure...
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Because AOL never distributed software by CD.
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Wooosh, the joke cruised over your head faster than the speed of comprehension causing severe turbulence. "Captain, the metaphor can't take it anymore, she's breaking up!" SPLOOSH! it crashes into the sea of mediocrity, lost like tears in rain.
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This is a troll, right?
Not so far wrong. (Score:4, Insightful)
I like AOL. It started the internet super-highway after all, and if not for it, we would all be on modems, gets our software by CD, yada-yada-yada.
AOL spared users the complexities of the Internet Suite of the '90s.
I still have the boxed set of manuals from Delrina. Clients for Telnet and BBS services, FTP. Archie Veronica, Gopher, IRC Chat, Usenet, a Browser, basic photo editing tools, compressed file management and so on.
AOL's clients were written for use by ordinary mortals. They played nice with third party software like mIRC.
GUI. Automatic updates. Fixed price monthly billing. Thousands of local access toll-free numbers. There was a lot to like about AOL and it is past time the geek got off his high horse and admitted it,
Re: Not so far wrong (Score:1)
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I remember spending hours trying to get one file to actually send to a friends house via ZMODEM
I came to despise the geek's impenetrable jargon and his indifference to the "luser." The thick printed manuals that came with the Delrina's WinFax Internet suite were a treasure and remain readable and entertaining to this day.
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AOL is to blame then for all the DULTS on the internet wasting bandwidth with web pages devoted to cats and all the stupid "kitty videos" and all that other MIND NUMBING cr@pola! It used to be you had to have a BRAIN to use the Internet, now all you need to be is stoned off your gourd and a "mouse potato" and just point and click.
COPIED ENTIRE SUMMARY !! (Score:4, Informative)
um whoever is doing submission checking should at least check that your not copying the ENTIRE summary from techcrunch... hence the subsidiary notice
Guys sort it out otherwise your going to get in trouble with lawyers and users !
John Jones
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This is the problem with private-sector benefits.. (Score:3)
It's really easy for them to go away when a couple companies (like IBM) get cheap, the rest else declare the new cheapness to be the industry standard; and everyone gets screwed. If the CEO is sufficiently dickish you can win one or two battles like this one; but unless every single job applicant asks about a specific benefit before taking the job they might change their minds; and if the government forces them to stop cutting benefits they will; but most of the time that shit just doesn't work. Hell most beneficiaries of 401ks probably don't know whether their company matches their contributions annually or per pay period.
OTOH if there's just one government program (like Social Security or Medicare), then everyone knows exactly what Congress is doing about it, and you can't screw beneficiaries without everyone knowing it.
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I believe this is talking about the company *matching* your contributions.
Obviously. Did anybody say otherwise?
In IBM's case, when I worked there, they matched up to 6% which is pretty damn generous.
6%. God bless their generosity. Wanna compare that to what it used to cost them for a defined benefit pension plan? Keep squeezing the peasants and they start to accept it as the new normal.
BTW, did you get laid off, or did you choose to leave? If you chose to, was it because you saw the handwriting on the wall?h
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BTW, did you get laid off, or did you choose to leave? If you chose to, was it because you saw the handwriting on the wall?
Can't speak for the other poster, but I got sold to another corporation like the chattel the CEOs think we are.
It's fashionable these days to pretty it up by inventing the new-speak "acquihire", but its still CEOs buying and selling what they view as their property.
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I've always enjoyed how the named the opposite of a defined benefit plan a 'defined contribution' plan instead of an 'undefined benefit' plan...
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Did he really say 6% ?? Holie shit, that bad. Even back when I was a construction laborer 10 yrs ago, the company matched us dollar for dollar. And that was in a non-union job, all you needed was 3 yrs attendance. The had Oppenheimer manage it, it was a pretty good deal since we were paid really poor to begin with.
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I believe the 6% means dollar for dollar up to 6% of your annual salary. If you put 10% of your earnings a year into your 401k or whatever retirement scheme they use, they will only match up to the 6% of your earnings mark.
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He probably means dollar per dollar up to 6% of gross annual pay.
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OTOH if there's just one government program (like Social Security or Medicare), then everyone knows exactly what Congress is doing about it, and you can't screw beneficiaries without everyone knowing it.
You're either a communist or a Canadian. Both start with a 'C', and America's right wing doesn't distinguish between them.
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It's really easy for them to go away when a couple companies (like IBM) get cheap, the rest else declare the new cheapness to be the industry standard; and everyone gets screwed. .
Yep, it's the start of the race to the bottom that once started the conclusion is almost inevitable. It's like the ripple affect from moving manufacturing out of the US. Once the first company did it the rest had to to compete...of course in typical US "head up the ass" fashion, no one looked longer term to see that the unemployed workers weren't buying new cars, new appliances, etc, thus driving the need to cut costs even further, thus accelerating the race. Hello bottom? America here calling....
abusing the 401k (Score:5, Interesting)
There are some who argue that the 401k is a bad investment option.
http://www.fa-mag.com/news/the... [fa-mag.com]
But note that by only disbursing matching funds on December 15th, IBM twists the arms of its employees to plan separation from the company at the most difficult time of transition. Right during the holidays and then a dead point for hiring in mid winter. They also incentivize employee harassment and unfair terminations prior to Dec 15th in order to cut costs by keeping what would have been 401k disbursements. And of course the funds are kept in an interest bearing or investment account controlled by the firm for a year, meaning those gains are lost to the employee.
I'd call that a terrible policy and one that any potential employee should carefully consider. Not only does it represent lost potential 401K gains, but much worse, it's an indication of how poorly management at the firm views its employees. Real 'company store' type stuff.
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IBM twists the arms of its employees to plan separation from the company at the most difficult time of transition. Right during the holidays and then a dead point for hiring in mid winter
I don't understand how that being a dead point in hiring would be a big deal. If you are separating from IBM and still want to have a job, you secure the job first, then quit. If you have a better job lined up even in late November, surely a one time 401k match of a couple of thousand dollars isn't enough to keep someone at IBM. If you are looking to retire, but the holidays are coming up and you for some reason want to wait, drop 401k contribution to zero and forfeit the no more than a couple hundred do
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Here's someone else who made many similar points to what I posted:
http://www.forbes.com/sites/he... [forbes.com]
Re:abusing the 401k (Score:4, Interesting)
What conduct in the workplace constitutes 'making people want to quit'?
Former IBMer who was driven to quit, so I'll chime in here...
Small things first: they took away the water coolers and free coffee and put in these awful instant coffee pay-per-cup machines (Flavia). At the same time they banned people bringing in their own machines and putting them in the break room (that's a fire hazard, you know). Finally they took away the Flavia machines due to lack of use. Cafeteria food was terrible and very expensive. Team outings / holiday parties are virtually non-existent now. Laptops used to be replaced every two years, then three, now four. I would not be surprised if in the future IBMers are just expected to buy their own laptops.
The raises and bonuses were always pathetic and have been scaled back more and more. If you were 1 (a top performer, 10% or less of the work force), your bonus was somewhere in the neighborhood of 2-3% and your raise was roughly the same or less. And did I mention that raise/bonus money comes out of a company-wide pool now? So if your division/group is crushing it but revenue is slipping company-wide (which it has for years) you're not going to get a bigger pool of money than anyone else. And oh yeah, this year they announced that ONLY 1-rated performers get a bonus. Everyone else, you suck. I would not be surprised if no one gets a bonus/raise next year, seriously.
Speaking of raises, there are two kinds. Top contributor (if you got a 2+ or 1 rating; this year I guess it's just for 1-rated folks) and Market Based Adjustment. If you got a top contributor raise, it was pretty tiny for the most part. The MBA is used to get you to 100% of what they think the median salary for someone in your position and band level is. Last year they decided 90% was good enough. So in other words, if your salary is within 45% of where your position/band peers top out, no more raises unless you were a top contributor (and again, we're talking 1-3% here, and they might not even give you that next year).
One more thing about raises. Last year they decided to move out the date for raises by three months. So in addition to getting a pathetic raise you had to go 15 months without one. I believe this year they're moving it out another month. Again, I would not be surprised if next year no one gets a bonus or raise.
Finally, there's the 401k match. If you're not employed on December 14th, you get nothing. That is some grade-A bullshit and so far they're the only major company with the balls to insult their employees like that. That was the last straw for me and I (and several others) were able to leave and keep our match.
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I don't understand how that being a dead point in hiring would be a big deal. If you are separating from IBM and still want to have a job, you secure the job first, then quit. If you have a better job lined up even in late November, surely a one time 401k match of a couple of thousand dollars isn't enough to keep someone at IBM.
Correct, you should have a job lined up first, but it's very, very difficult to time something perfectly so as to minimize the matching hit (i.e., as soon after 12/15 as possible). And the amount of money you forfeit is not a trivial amount. IBM matches 6%, so for your average 100K+ salary, that's 6K+ of investment money flushed right down the toilet if you leave towards the end of the year. You can't just look at it as "oh well, I lost out on 6K." Look at it as "I lost out on 6K that could've been inve
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One big problem with many 401ks are the crummy investment options. I worked for a small company whose 401k investment options were those offered by the company that managed the fund. Crap returns, high overhead.
Re:abusing the 401k (Score:5, Interesting)
http://wallstreetonparade.com/... [wallstreetonparade.com]
Documentary here:
http://www.pbs.org/wgbh/pages/... [pbs.org]
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Costs ARE a big deal when it comes to investing.
Not all 401Ks are high cost. It's often worth lobbying your HR department to get good low cost investment options. A few Vanguard or Fidelity Spartan funds made a huge difference.
Get a company like Vanguard in there to run your 401K plan and you will be very happy that your investment options are offered by the same company that runs your plan. They are brilliant.
Also in this mobile world it pays to roll over to a IRA as soon as you can so you can pick the low
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lol, I can beat that. my employer went into the investment business and manages the funds in their 401K (and charges their employees fees)
(their principal business has nothing to do with financial management)
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It's pretty much always a no-brainer to contribute enough to your 401K in order to get the company match. That's usually an instant 50% return on your money. Every serious financial analysis makes that the first savings priority.
As far as the issue of tax rates, early in retirement it's generally possible to delay taking social security for a couple of years, and use that time to convert your 401K to a ROTH plan at extremely low tax rates.
The article you linked to is not very credible because it misses both
My solution (Score:1)
What I do is seek a contract, then through my own LLC provide a solo 401(k), provide my own healthcare, etc. My benefits won't vanish on someone else's whim, and I have access to all the funds offered by my favorite investment manager. Plus my clients don't have to supply the benefits they would otherwise offer, and only have to pay for the hours I work (and I only have to be around when there is work).
Then again, there's kind of a seller's market for people with multiple computer science degrees, so YMMV
down the drain (Score:1, Insightful)
So glad I no longer live and work in the US
Excuses (Score:4, Interesting)
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It is odd to see a brown bag meeting like this. But rarely would the CEO address employees in their workplace. It is usually in a place intended for such meetings, and then webcast remotely if needed.
In other words, if you don't know what you are talking about, don't jump to conclusions and then post about how your conclusions are terrible.
AOL's David Shing, Professional Nothing (Score:5, Interesting)
On Gawker, Sam Biddle points out that while AOL claimed it couldn't afford its old retirement plan, it is able to afford "Shingy," who Biddle describe as a "professional nothing". Shingy's job title is "Digital Prophet," which means "he's gloating about the fact that he has a make believe job at AOL, unlike most tech charlatans, who try to conceal it":
This Man Is Representing AOL on Live Television [gawker.com]
Lemme guess... (Score:1)
he got an immediate bonus for saving so much (?) money by coming up with the idea of delaying employee 401k matching funds. That must be why CEOs get paid so much to play golf with their buddies from other companies... like IBM.
Actually, it's a great idea, especially if layoffs are in your bonus generating toolkit for the coming year. Those employees who get laid off won't get the 401k matching because they won't make it to the end of the year, thus saving even more money and generating an even bigger bon
Re:Lemme guess... (Score:5, Insightful)
Eat the rich!
They probably taste lousy. I'd settle for the oppressive treatment they received in the radical days of the Eisenhower administration.
I wish people had a better understanding of history. Calling for a return to the tax structure (up to 90% on the wealthy's incomes), the percentage going to employee compensation, etc., that we had in the 1950's probably would get me branded a "socialist" (by people who don't even understand what the word means). Yet that's what we had in those idyllic Ozzie and Harriet days that so many, including the right wing, see as a lost golden era.
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Calling for a return to the tax structure (up to 90% on the wealthy's incomes), the percentage going to employee compensation, etc., that we had in the 1950's probably would get me branded a "socialist" (by people who don't even understand what the word means). Yet that's what we had in those idyllic Ozzie and Harriet days that so many, including the right wing, see as a lost golden era.
More likely it would just get you branded as an idiot. You might want to keep in mind, in the 1950's the US was the only game in town. Europe was recovering from 2 world wars, made in Japan was synonymous for cheap junk, Korea was in the midst of a civil war, and China and India were mostly known for mass famines. If you wanted to play in the big leagues, you played in the US.
Try charging those kind of tax rates now, and see if you can count to 10 before a major amount of capital flees to friendlier shores.
I'm sorry, I thought I could get away with it (Score:3)
I guess I was wrong. Sorry.
AOL? (Score:2)
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That thing still around?
I'm still on hold trying to cancel my account.
Exactly why we need ACA (Score:2)
So that a smug overpaid CEO of a sinking remnant of a company could not complain about employees receiving "too much money" for the healthcare for their family. Incidentally, this douche's compensation is north of 25 million dollars. That would pay for a dozen families health needs.
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we should measure his compensation in distressed babies
Sounds To Me (Score:5, Interesting)
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What good is a labor union going to do? Any techie that's unable to negotiate their own compensation is probably a techie that needs to brush on their interviewing and technical skills. The proper thing to do in this situation is to voice displeasure, discuss concerns with management, and ultimately.. work somewhere else. I'm going through the same thing right now. It sucks, but it's a far better option. Labor unions will do nothing but suck dues from your paycheck and reward mediocrity. The folks who
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You put the least amount of work into that reply that you possibly could have. I assume this means you're a member of a labor union.
Tech jobs are usually more involved than sitting in front of a computer all day. If you can't negotiate compensation, you're probably lacking in some of the job requirements as well. Pitching a new feature or pushing for one solution over another is not that much different than persuading a would-be employer to meet a desired compensation package.
Meeting minimums is hardly a
OINK (Score:1)
Another word starting with "L" (Score:2)
Loser.
Tim Armstrong's Performance at Google (Score:1)
OT: Creative Commons fame (Score:2)
Nice to see my mum's allotment garden on /. :-)
This is AOL we're talking about (Score:2)
I wouldn't expect anything less.
401K matching changes: tax on bad mathematicians (Score:1)
401K matching changes: tax on bad mathematicians
The 401K matching delay change only matters under to conditions:
(1) You aren't around for when the match happens, and it doesn't happen at severance ("the end of your tenure at the company").
That actually was not the case here.
(2) You are bad at simple math.
This is the case that the change counts upon to save the company money.
If you are bad at simple math, you can't work backwards from the maximum contribution amount to get to the exact amount of employee con
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You can also lose quite a bit if
3) The stock market funds where you have designated for your 401K contributions goes up during the calendar year. The S&P 500 went up by 30 percent in 2013.
Of course, the market can go down too, but that happens relatively infrequently on a year-over-year basis.
This isn't why people are pissed. The change is intended to cause any 401K program to extract more money out of the employees pretax earnings and less money out of the company's matching contribution, so that the company pays out less in benefits.
It only works if the people they try to pull it on are too stupid to do basic math and/or are too stupid to do minimal financial preplanning. The people complaining are agreeing that they are too stupid. Or they are just complaining because "we fear change".
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You realize that the employer match is not applied to the $17,500 annual limit on 401K contributions, I assume. (Not counting catch up contributions.)
There *is* a combined employee contribution + match limit of about $51,000.... however assuming you contribute the max $17,500 I think one would be hard pressed to find an employer that matches roughly 200% of an employees contributions (however they do exist) with no cap (not sure if that exists) to comprise the needed $33,500 to put you over the edge.
Nobody maxes their 401K; the IRS limits the employer contribution based on the lowest paid eligible employee, so unless everyone is makes huge salaries, it's impossible to max it anyway. The limits are set so that a magic, egalitarian company that might exist in fairyland some day could theoretically fund employee retirement, you know, if it weren't in business for profit.
So the game is not to max out the total 401K contribution, since it's never going to allow you to retire anyway, the game is to max out
Mother of one of the "Distressed Babies" responds (Score:1)
Deanna Fei, mother to one of the "Distressed Babies" responds in the following article.
It shows how terribly insesitive Armstong's comments were!
http://www.slate.com/articles/... [slate.com]
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So you have 1 friend. Big deal.
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Good point.