AOL changes 401(k) plan prior to notifying employees

AOL's decision to change its 401(k) matching plan caused more of a buzz than the company would have liked.

AOL's decision to change its 401(k) matching plan caused more of a buzz than the company would have liked.

Since AOL CEO Tim Armstrong held a conference call to readjust the company's 401(k) matching plan, he has since decided to revert back to the old plan, amidst rising backlash.

However, Forbes contributor Anne Squeo explains that the choice to change the 401(k) matching program was not the problem, it was how Armstrong went about doing so — failing to address through the company's HR software solutions until he made an appearance on CNBC.

"Employees deserve to hear bad news first, before Wall Street or anyone else does," Squeo wrote. "And while one of Armstrong's emails in the last few days says the news was disseminated through "multiple channels" last fall to AOL offices, it is clear most employees learned of it for the first time Thursday."

AOL's staff had other issues with Armstrong's approach, which explained that the readjustment of matching 401(k) contributions was derived from the cost of two employees's "distressed babies," the New York Times cited. He continued by stating that the price of health care was increasing, so they needed to make cuts somewhere.

"We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK, in general," Armstrong's transcript of the conference call reads.

Human resources professionals know that these statements by Armstrong are an HR no-no. Regardless of the size of a business, personally calling out reasons for any adjustment might make workers feel attacked.

If an organization wishes to make a widespread change about any policy, it might be best to do so within HR software. This way, everyone is informed at the same time and the new details are readily available for review.