ForbesHobby Lobby Owners Can Have a 401(k) and First Amendment Rights
By Ryan Ellis
There’s been an absurd story from Mother Jones making the rounds this week. Authored by Molly Redden (who has never signed the front of a paycheck, but does “spend too much time cooking and watching television,” according to her bio) and echoed here on Forbes.com by Rick Ungar, the argument is that Hobby Lobby can’t have religious convictions and a regular 401(k) plan for their employees at the same time.
Hobby Lobby (which is a closely-held corporation with a few family owners) is suing the Obama Administration over Obamacare’s requirement that Hobby Lobby pay directly for drugs which can and do lead to early-pregnancy abortions. Being a material and proximate cooperator in such an action violates the business owners’ deeply-held religious views protected by the First Amendment to the Constitution.
Apparently, this also means that Hobby Lobby can’t have a 401(k) plan for their employees? Why? Well, according to Redden and Ungar, the Hobby Lobby owners are religious kook hypocrites. The company 401(k) plan has investments which themselves invest in companies that make the abortion drugs.
This is a ridiculous argument for several reasons, all of which would be obvious to Redden and Ungar if they had ever run a business in their lives: 401(k) plans are directed and invested by employees, not by employers.
It’s the Hobby Lobby employees that would be disenfranchised by the twisted logic employed by Redden and Ungar here. They are the ones–not their bosses–who choose which mutual funds to invest in. This is true both of the employee’s elective deferral and the employer’s match.
The menu of choices is primarily provided not by the Hobby Lobby employers, but by the 401(k) plan administrator, who helps select a wide menu of mutual fund (and, increasingly, exchange-traded fund) choices so that the fiduciary obligations of the plan are met.401(k) plans don’t invest in company stock–they invest in mutual funds.
A mutual fund, to state the obvious, is an investment company which invests assets in actual stocks. When you buy a share of a mutual fund, you are buying a very small indirect ownership of hundreds or even thousands of stocks. The most common 401(k) plan mutual funds are index funds, which invest the fund shareholder in the entire stock market (or close to it) in one fell swoop.401(k) plans have a limited number of choices, and that’s a good thing.
Redden in particular seems to think that you can invest your 401(k) dollars (actually, that your employer can invest your 401(k) dollars) in any mutual fund at all, including socially-conscious ones. That’s not accurate. Plan administrators contract with select mutual fund companies to provide basic investment products diversified by sector, asset class, duration, risk, etc. This is the primary goal of diversification of fund choices, not socially-conscious investing. Besides, it’s the employees who call the shots. They may not share the same values as the Hobby Lobby owners, and might have a very different idea of what a “socially responsible” fund would invest in.
Furthermore, you don’t want to provide dozens to hundreds of investment choices for employees. All the research I’ve ever seen on this has said that if you give employees too many choices, they will fear making a bad one and never deploy their cash toward any investment at all. Additionally, each new mutual fund offered within a plan drives up 401(k) plan fees. Surely Redden and Ungar agree with the Obama Administration that 401(k) fees are too high and should come down, right?What does Mother Jones’ or Mercury Public Affairs’ 401(k) plan look like?
Those are the employers of Redden and Ungar, respectively. Surely those 401(k) plans invest in stocks of oil and gas companies, defense contractors, private equity firms, and other evil conservative power bastions. Have Redden and/or Ungar done a forensic investigation of the mutual funds they are invested in? Should I call them hypocrites for daring to invest in a 401(k) which invests in a mutual fund which invests in a multinational company which happens to own an oil company? If not, consider that the Hobby Lobby employers have one more degree of separation even from Redden and Ungar. Our two intrepid reporters affirmatively chose to invest in merchants of death when they picked out their 401(k) choices. All Hobby Lobby is doing is providing the platform for employees to make those same choices themselves in partnership with plan administrators.
It’s an absurd argument, and one which isn’t that hard to dispute if you’re familiar with how 401(k) plans actually work. But it’s not surprising to see such a weak argument advanced. The secular Left is doing everything they can to drive people of faith from the public square’s marketplace. The ridiculous idea that a religiously-convicted employer can’t offer a reasonable 401(k) plan is really not that different from saying a religiously-convicted photographer can be ordered by the government to shoot a gay wedding. Religious minorities are under assault from secular bullies, and unfortunately Redden and Ungar are in their ranks.