By LESLIE KAUFMAN
FEB. 9, 2014 - New York Times

Tim Armstrong, the chief executive of AOL, did an about-face on Saturday, reversing an unpopular change in the media company’s employee benefits program and apologizing for publicly singling out two families’ health care issues as a cause of those changes.

AOL had recently altered its 401(k) program, switching its matching payments to one lump sum at year-end instead of throughout the year. The change would have disadvantaged AOL employees, especially those who left the company before Dec. 31. On an internal call last Thursday discussing the new policy, he had attributed the change partly to soaring medical costs associated with two families’ “distressed babies.”

In an email to employees late on Saturday, Mr. Armstrong announced the company’s reversal.

“The leadership team and I listened to your feedback over the last week,” Mr. Armstrong wrote. “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.”

Under Mr. Armstrong’s leadership, AOL has transformed itself from an Internet portal to a diversified media company. His strong bets on video advertising, in particular, have improved the company’s financial performance.

But the commotion surrounding AOL’s benefits program was the second time in the last year that Mr. Armstrong has been forced to apologize for his actions or comments during internal meetings.

During a tense meeting in August with employees at AOL’s troubled Patch unit, a collection of local news sites, he fired an employee who was taking photographs of him during the meeting. He apologized four days later. AOL recently sold a majority stake in Patch to Hale Global, a turnaround firm.

In the current episode, Mr. Armstrong came under criticism for what numerous AOL employees thought were insensitive remarks while discussing the company’s increased medical costs. To make his point, he cited specific health care examples.

“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 O.K., in general,” he said, according to a transcript of the call provided by an AOL employee.

Numerous AOL employees were displeased that Mr. Armstrong had singled out two co-workers, although without mentioning their names. His comment drew substantial attention and criticism on social media. Deanna Fei, who is the mother of one of the babies and whose husband works for AOL, wrote a first-person account for the online magazine Slate that described her daughter’s harrowing birth and her own anger over Mr. Armstrong’s remarks.

By Saturday, Mr. Armstrong and AOL management announced that the company was reversing the change to its 401(k) policy.

“I made a mistake,” Mr. Armstrong said on Saturday. “I apologize for my comments last week at the town hall when I mentioned specific health care examples in trying to explain our decision-making process around our employee benefit programs.”

The mea culpa came as Ms. Fei, a novelist and the wife of Peter Goodman, an editor at AOL’s Huffington Post, disclosed that she was the mother of one of the babies whom Mr. Armstrong had highlighted. In her essay for Slate, Ms. Fei blasted Mr. Armstrong’s statement. (Mr. Goodman worked previously at The New York Times.)

“Let’s set aside the fact that Armstrong — who took home $12 million in pay in 2012 — felt the need to announce a cut in employee benefits on the very day that he touted the best quarterly earnings in years,” she wrote. (Mr. Armstrong was actually discussing a policy change that was announced in October.) “For me and my husband — who have been genuinely grateful for AOL’s benefits, which are actually quite generous — the hardest thing to bear has been the whiff of judgment in Armstrong’s statement, as if we selfishly gobbled up an obscenely large slice of the collective health care pie.”

In the article, Ms. Fei described the premature birth of her daughter — she weighed 1 pound, 9 ounces when she was born in October 2012, only five months into a healthy pregnancy.

“Isn’t that the whole point of health insurance?” Ms. Fei wrote, referring to the neonatal intensive care her daughter received. “Having her very existence used as a scapegoat for cutting corporate benefits was one indignity too many.”

A version of this article appears in print on February 10, 2014, on page B3 of the New York edition with the headline: Facing Criticism After Remarks, AOL Chief Reverses 401(k) Changes.