Axel Springer's 401(k) Blunder Boosted Politico Union Effort

The German media company's acquisition of Politico left staffers without a retirement plan while organizers were gathering union cards.
Axel Springer acquired Politico last month in a $1 billion deal.
Axel Springer acquired Politico last month in a $1 billion deal.
Thomas Peter via Reuters

Journalists at Politico and E&E News had been working to form a union for several months when their new owner, the German media company Axel Springer, gave the organizing effort an inadvertent boost.

On Oct. 19, hours after Axel Springer officially acquired the news sites from Robert Allbritton for $1 billion, Politico human resources chief Traci Schweikert sent an email to staffers regarding an “important update” on their benefits. The top of the note explained that their paid time off and health care would remain unchanged, but the third bullet point was what journalists call a “buried lede”: their 401(k) plan would be halted for at least several months.

We anticipate that the new plan will be available in early 2022,” she wrote.

Losing the 401(k) plan, even temporarily, would amount to a compensation cut, since employees received a match from Politico worth up to 3% of their salary. A followup note from Schweikert said Axel Springer was “committed to finding a solution that compensates 401(k) participants for the temporary gap.”

Staffers wondered why the retirement plan wasn’t tended to as the deal closed. A private Signal group for employees filled with concern and anger, several said.

“It blew up much more over that than it did over the Ben Smith piece in The New York Times,” said one reporter, referencing Smith’s investigation detailing sexual harassment complaints at the German publisher.

The reporter, who spoke on condition of anonymity, said the company’s mishandling of the 401(k) undoubtedly gave the union campaign some added momentum. Last Friday, a week and a half after Schweikert’s initial email, staffers at Politico and E&E announced that they had gathered union cards from 80% of the expected bargaining unit of 250 workers, Bloomberg reported. They intend to unionize under the name PEN Guild, as an affiliate of the NewsGuild-CWA.

“It was one of those things that undermines trust in management,” the reporter said of the 401(k) snafu. “And if you’re management and you know there’s a concerted union drive going on at the moment, it is not a good time to undermine trust with your employees.”

Allbritton had urged staffers not to seek out union representation in August, saying it was “not in the publication’s interests, our reader’s interests, or in the interests of individual employees.”

“It was one of those things that undermines trust in management.”

- a Politico reporter

Workers have many different reasons for joining a union effort, and several Politico employees said they have broader concerns over pay equity and working conditions. But the temporary loss of a 401(k) plan hits everyone on the income scale who participates ― including high earners who might otherwise be lukewarm on a union ― and serves as a reminder of how easily benefits can disappear when they’re not contractual.

Gavin Bade, who covers trade for Politico Pro and is a member of the PEN Guild organizing committee, agreed that the 401(k) likely contributed to the union’s extremely high signup rate, though it was not “the overwhelming factor.” The committee tracked support over time and could see a boost after the 401(k) brouhaha.

“We were obviously talking to a lot of people throughout the newsroom, and pressing people to sign union cards,” Bade said. “But we definitely saw another surge of support after the 401(k) issue, and just solidifying support among people who might have been on the fence.”

Four other Politico and E&E staffers said they agreed with that assessment.

Eric Phillips, an Axel Springer spokesperson, said the company was working on fixing the 401(k) issue.

“It is our top priority to find a solution that compensates 401(k) participants for the temporary gap in coverage,” he said in an email. “We are working to resolve the matter as quickly as possible and expect to announce details very soon.”

For now, the money that workers would have put into their retirement accounts is going straight into their paychecks.

In theory, the company could give workers a lump payment or temporarily increase the employer contributions once a new 401(k) plan is up and running. But several staffers noted that they weren’t sure how the company might account for potential market gains during the months they didn’t have a plan.

Even trickier is how Axel Springer could expect to make up for employees’ lost tax advantages.

Employer 401(k) plans divert your pre-tax income to a retirement account, lowering your adjusted gross income and therefore your tax bill. Going without a 401(k) plan for a while not only costs you the employer contributions but increases your tax liability. Having a higher gross income than expected can have other downsides, too, since it could impact a filer’s eligibility for the new child tax credit or the ability to make Roth IRA contributions.

Politico and E&E employees will apparently be moving from one Vanguard plan to another. In one of her emails to staff, Schweikert said the 401(k) hiatus came about because of the speed of the deal between Axel Springer and Allbritton. “Due to the short time between signing and closing of the acquisition, Vanguard was not able to establish the new plan immediately following close.”

“We definitely saw another surge of support after the 401(k) issue.”

- Gavin Bade, PEN Guild organizing committee

A $1 billion acquisition creates a lot of paperwork for lawyers, and human resource issues can sometimes fall by the wayside, said Ted Benna, a retired consultant who’s often credited with creating the first 401(k) plan following the Revenue Act of 1978. Benna said the 401(k) plan transition can be smooth with proper planning.

“There isn’t any reason there has to be any break or disruption in participation, other than it’s not as high a priority as other things,” he said.

Representatives of the PEN Guild met for the first time Monday with Politico’s general counsel to discuss several issues, including the 401(k). The union is hoping to work out a deal for “voluntary recognition,” in which Axel Springer would opt to start bargaining with the union rather than force an election through the National Labor Relations Board. In the latter scenario, the union would need to win a majority of votes.

The apparent supermajority of support gives the union a strong position. From the employer’s standpoint, forcing an election can start to look a little futile when 80% of employees support the union effort. That may be especially true in journalism, where employers who demand NLRB elections in the face of a stack of union cards don’t have a great track record.

Strong union participation would be particularly important at Politico and E&E, which are based in Rosslyn, Virginia. Virginia is a right-to-work state, making the workplace an “open shop” where contributing dues would be optional, even though the union would be obliged to bargain on everyone’s behalf. Open shops require unions to do more work signing up members, but they can also make for a stronger, more engaged membership.

One Politico employee said they were onboard with the union effort all along, but the 401(k) news served as a reminder of why it was necessary.

“Without a voice at the table, the things you think are pretty good can actually change pretty quickly,” they said.

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