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AOL’s Armstrong Responds to 401(K) Controversy in Internal Memo to Employees

CEO Tim Armstrong had to explain himself after he cited the cost of treating two "distressed babies" of AOL employees, Re/code reports.

Discussing changes to AOL's 401(k) at a townhall meeting of staffers on Thursday, Armstrong said:

"We had a $7.1 million bill from the Obamacare act in general and we had multiple other things that happened at the company health-care-wise. Two things that happened in 2012: We had two AOLers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost."

(Read more: AOL alters 401(k) benefirs due to Obamacare)

Staffers were not too pleased, according to Re/code.

Armstrong responded: "The spirit of the townhall and the spirit of how we choose benefits are the same—we want to be open and transparent about the choices we make and why we are making them."

Read Re/code's full story here.

By Kara Swisher, recode.net.

CNBC's parent NBC Universal is an investor in re/code's parent Revere Digital, and the companies have a content-sharing arrangement.

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