consultants are sandburs

Saturday, July 05, 2014

Hobby Lobby, the firm itself, and 401k investment allegations.

Do it in a point/counterpoint format.


Hobby Lobby does invest in birth control
By Heather Long @byHeatherLong July 2, 2014: 11:10 AM ET

Hobby Lobby's founders have made it clear that any abortion and certain contraceptives are unacceptable in their eyes, yet the company's 401(k) plan has millions of dollars invested in funds that own the companies that make birth control methods including Plan B, the so-called "morning after" drug.

Like many companies, Hobby Lobby offers its employees a 401(k) plan. Over 13,000 past and present employees have taken advantage of that plan, according to the latest documents filed with the Department of Labor.
Employees have the option to put their retirement dollars -- and the money that Hobby Lobby contributes on their behalf -- into over a dozen different mutual funds.

At least eight of those funds have been invested in companies that produce contraceptives such as Teva Pharmaceutical (TEVA), Bayer (BAYRY), and Pfizer (PFE), according to a CNNMoney analysis. Teva makes Plan B. At least one fund also held Forest Laboratories, which makes a drug that is used to induce abortions.

These are huge drug companies that make many different medications. Contraceptives are only part of the mix, and the investment funds have very small stakes in these pharmaceutical firms overall.

Hobby Lobby has not responded to CNN requests for comment about its retirement plan. Mother Jones broke the story about the company's 401(k) plan in April.

How Hobby Lobby can avoid investing in birth control: There are ways Hobby Lobby could strip out investments dealing with contraceptives.

For example, an investment management firm called Ave Maria Funds offers a "Catholic Values" fund that "screens out two major categories of companies: those involved with abortion and those judged to be anti-family, such as companies which distribute pornographic materials or whose policies undermine the Sacrament of Marriage."

[...] Another option for the company would be to ask its providers such as Vanguard to create a custom portfolio, sometimes dubbed a "separately managed account." This would essentially put Hobby Lobby's funds into their own bucket and give the company more control to forbid investments in firms like Teva.

That said, any time you ask for something special, it often costs more.

"While it would be possible to create some kind of custom portfolio, I don't know that that would be feasible in 401(k)-type account given the costs involved. It's probably doable, but expensive," says David Blanchett, the head of retirement research for Morningstar Investment Management.

(source: CNN, online here, links in original)


OPINION - 7/01/2014 @ 8:14AM - Hobby Lobby Owners Can Have a 401(k) and First Amendment Rights

[...] 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.

(source: Forbes, online here, bolding in original)

Does the Forbes argument beg the question, or pose it correctly - as one of degree of relative control employers/employees have over 401k investment choices? Ask a lawyer or HR specialist; I have no idea on whether Hobby Lobby could have tailored its 401k along the lines the CNN item suggests; although it seems likely. That actually would be one hell of a good question for this bunch of five Supreme Court clowns to face, now that they've done their initial mischief. They are mediocre, and a very bad joke being played on our nation. They should show more wisdom, or at least a better degree of self control in their pontifications.

It seems the premise of the willful five is that ownership whim/belief trumps all those thousands of employees and their right to attain equal medical coverage to everyone else. That owners are supreme. That employee rights don't mean squat.

With that bias, it seems the willful five would again say ownership outweighs employee rights, as to 401k money rights. Were they in good conscience to consider such a "fallout" question.

Perhaps? Perhaps not? As a preliminary matter, somebody would have to pose that question in litigation before the Supremes could pontificate on it.

The bottom line ultimate answer: A constitutional amendment declaring that corporations are only legal fictional creations and not "people" in any sense equivalent to human persons, and that ownership of all the sharees in a closely held firm does not allow discrimination against equal rights for employees [actual persons] of the corporation [a fictional person]; and that as being mere creations of law they can have any/all of their powers and opportunities granted and/or proscribed by law, including absolute prohibition against corporations piddling in elections or paying lobbyists. Cut them off at the knees, as was always the proper answer grown out of English common and statutory law, despite the Supremes and their current run of mish-mosh output. A constitutional amendment needs to happen. Citizens United went wrongly and too far, and Hobby Lobby only builds the mistake.

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