AOL chief executive Tim Armstrong has backtracked on a 401(k) policy change over the weekend after his comments defending the idea fueled employee outrage.

Armstrong had said last week AOL needed the retirement-plan tweak -- matching employee contributions in one annual lump sum instead of incrementally -- to help offset health care costs, such as two pregnancies resulting in "distressed babies" with $1 million-plus each in medical expenses. After the outcry, he reversed the decision in a memo to employees.

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"I made a mistake and I apologize for my comments," Armstrong, 43, said in the memo.

Armstrong's comments prompted the mother of one of the "distressed babies" to criticize him in an essay she wrote for Slate.com. "We experienced exactly the kind of unforeseeable, unpreventable medical crisis that any health plan is supposed to cover," Deanna Fei wrote for the news and analysis website. "Isn't that the whole point of health insurance?"

The controversy was Armstrong's second in six months. In August he apologized for firing a creative director in front of a roomful of employees and others listening on a conference call.-- Bloomberg News