Abortion and Politics

[scott8]

Re: Hobby Lobby and 401(k)'s...

Hobby Lobby Owners Can Have a 401(k) and First Amendment Rights

Hobby Lobby's Critics Have No Idea How Investments Work

You can google for the folks who are continuing to say that Hobby Lobby invests in abortion pill makers via its 401(k) plan.  That sentence alone (which is in many headlines in various permutations) shows the depth of the ignorance out there regarding what 401(k) plans are.

Also, a friend of mine from UVA (actually, a full professor) posted the Mother Jones article on FB, and a friend of his who is a fund manager responded in the following way:

Fund Manager (FM): Seriously? Their retirement plan offers options for mutual funds that invest in contraceptive companies? I feel stupider for having read this story. 401(k) committees do not pick stocks -- they pick the funds that their employees' contributions are invested in. The employees choose which funds they want to buy out of the list and the fund managers pick the stocks. What those employees and fund managers select has nothing to do with the belief system of the company. NOTHING.

The people who wrote this are completely ignorant about lots of things, or maybe they're just super-wise about the fact that their intended audience would mindlessly lap this up. (I apologize here for what I'm implying, professor.)


FM (in response to the idea that you can pick particular funds): Yes, of course you may pick one, or even several. But the charge of a 401(k) plan committee is to offer a diverse choice of appropriate funds. You have a fiduciary responsibility, and that supersedes any other consideration.

It would be entirely different if they were offering a pension plan or other plan in which they had an active choice in creating an investment policy. Then they could tell their investors "you must buy this, you may not buy that." But that's not how 401(k) plans work.


FM (in response to the idea that you can tell a fund manager what to invest in): ____, I am a fund manager. No, an investor could absolutely not tell me what and what not to buy in a mutual fund I manage.


FM (in response to giving a fund a list of investments): ______, this is complex but I'll try to be brief. 401(k) committees are subject to ERISA, and mutual fund companies are subject to the Investment Co. Act of 1940.

ERISA places great control on the actions of the 401(k) committee. Essentially, they must ensure that the plan fiduciaries do not misuse investor funds in the plan. This is a really important thing the author ignored. 401(k) plan assets are NOT the company's, but the beneficiaries'. 401(k) plans are not carried on company balance sheets.

The committee comes up with a diverse set of reasonable investment options (stock funds, bond funds, income funds, age appropriate funds, etc.). They can also come up with some special choices (international, socially responsible, gold, etc.), but ERISA deeply limits these choices. Remember, it's not the companies' money -- they're just the sponsor.

For the fund companies, they offer funds by prospectus. It is really, really bad for your fund to say it's going to do one thing, and then do another. It is even worse for a fund manager to give any uneven access to investors regarding fund holdings. So no, under no circumstances could I give a single investor a current list of what our fund holds, unless I really enjoyed massive fines and potential jail time.

So contrary to your assertion, with 401(k) assets the company is actually making no value decision whatsoever with how the funds are invested. They can't. They don't own the money anymore. It's like saying my decision to go and buy a Justin Bieber album with my paycheck would mean that my employer endorses Justin Bieber. If the author didn't know this difference she practices shoddy journalism. If she did know the difference, this was just a hit piece.

(I hope this hit the balance between accuracy and brevity.)


FM (in response to a repeated accusation of hypocrisy on behalf of Hobby Lobby for "profiting" from abortifacients): ____, I will give you the benefit of the doubt that you didn't read what I wrote, because it's very clear.

1) Hobby Lobby does not own the assets in its 401(k) program and therefore cannot possibly profit front them.

2) When you buy shares of a mutual fund, you own shares of the fund, not shares of the assets within the fund. You cannot know what's in the fund at any point in time, you cannot vote proxies, no one recognizes you as a part owner of that business. The fiduciary requirement for a 401(k) committee stops (mostly) at the fund level.

The 401(k) committee job in most companies is like a 10 hour per year job. We took our fiduciary responsibility very seriously and at no point did we ever, ever do a security-by-security analysis of what was in the funds in our plan.


FM (in response to the idea that Hobby Lobby should only offer one, "approved" 401(k) plan and that you can provide a fund manager a list of approved investments): _______ -- I am not a securities lawyer so I cannot say that the scenario you describe is illegal, but it is at best highly improbable. A 401(k) committee would not present a single option 401(k) plan to a diverse set of employees, because they are required to show that they have considered the financial interests of the plan members. Many plans have SRI options, but they are only a part of the plan.

For part 2 of your question, that would be impossible in a mutual fund construct. Funds are managed by prospectus in the best judgment of the fund manager. If the exclusions are not disclosed in the prospectus, they cannot simply be added because a client demands them.

[Satis Est]

Do you not understand how a 401K works?  That it is the employee who makes the investment decision, not the employer.  UPDATE (anticipating): even for the company match.

Apparently, Sterling, you don't know how 401k plans work either.


Employees are NOT free to invest in anything within a company 401k plan. Rather the company specifies what vehicles are available for investing, sometimes a few, sometimes several, and those funds are usually managed by a 3rd party. The company may setup some funds for special purposes, such as the ELCA does with its funds which do not invest in weapons and defense development. So, at least in theory, a company could insist that no investments were made in contraceptive drugs in any of its plans.

How judgmental of the ELCA to refuse to invest in weapons and defense. They must be trying to set up a Theocracy.

The ELCA (and its predecessor body, the LCA) continued to allow pension funds to be invested in companies that were in South Africa even while it was calling for divestment from companies in and investing in South Africa because of apartheid. Why? Because of the "prudent man" rule. (I heard this explained during a defense by a Board of Pensions rep during an LCA Assembly.) Even after "apartheid-free" funds were established, they continued to offer funds that had investments in South Africa. Today, when the pension plan has changed into, basically, a 403b plan, the ELCA plan (now Portico) continues to offer both "social conscience" funds and funds that don't take such issues into account when making investment decisions. (And they still got sued.)

And yes, in spite of my personal beliefs, I assume that my retirement monies are invested in drugs (including abortifacients), guns, and tobacco products. (Hopefully not wild women, but who knows?)

[Matt Hummel]

The ELCA (and its predecessor body, the LCA) continued to allow pension funds to be invested in companies that were in South Africa even while it was calling for divestment from companies in and investing in South Africa because of apartheid. Why? Because of the "prudent man" rule. (I heard this explained during a defense by a Board of Pensions rep during an LCA Assembly.) Even after "apartheid-free" funds were established, they continued to offer funds that had investments in South Africa. Today, when the pension plan has changed into, basically, a 403b plan, the ELCA plan (now Portico) continues to offer both "social conscience" funds and funds that don't take such issues into account when making investment decisions. (And they still got sued.)

And yes, in spite of my personal beliefs, I assume that my retirement monies are invested in drugs (including abortifacients), guns, and tobacco products. (Hopefully not wild women, but who knows?)

Erma-

Thanks.  There is also a cautionary tale in divestment, etc.  One of the products boycotted during the whole anti-apartheid period was SA lobster tails.  This was a fishery developed by Portuguese Catholics who, when they made their killing and went back to Portugal, sold their boats & equipment to the crews who had worked them  for them.  The crews were Black.  So lots of American Liberals got to feel good about themselves by not eating  something that, if they had, would have actually supported economic freedom for Blacks in South Africa.  Oh the sweet taste of irony with drawn butter.

[Michael Slusser]

The ELCA (and its predecessor body, the LCA) continued to allow pension funds to be invested in companies that were in South Africa even while it was calling for divestment from companies in and investing in South Africa because of apartheid. Why? Because of the "prudent man" rule. (I heard this explained during a defense by a Board of Pensions rep during an LCA Assembly.) Even after "apartheid-free" funds were established, they continued to offer funds that had investments in South Africa. Today, when the pension plan has changed into, basically, a 403b plan, the ELCA plan (now Portico) continues to offer both "social conscience" funds and funds that don't take such issues into account when making investment decisions. (And they still got sued.)

And yes, in spite of my personal beliefs, I assume that my retirement monies are invested in drugs (including abortifacients), guns, and tobacco products. (Hopefully not wild women, but who knows?)

Erma-

Thanks.  There is also a cautionary tale in divestment, etc.  One of the products boycotted during the whole anti-apartheid period was SA lobster tails.  This was a fishery developed by Portuguese Catholics who, when they made their killing and went back to Portugal, sold their boats & equipment to the crews who had worked them  for them.  The crews were Black.  So lots of American Liberals got to feel good about themselves by not eating  something that, if they had, would have actually supported economic freedom for Blacks in South Africa.  Oh the sweet taste of irony with drawn butter.

At the upper levels of financial mergers and acquisitions, things are so intermingled that I do not believe it is possible to invest pension funds exclusively in firms that are "innocent." I would be willing to settle for using investment managers whose own policies do not act to undermine free enterprise and fair dealing. I've been told that that is also extremely difficult to investigate, if not impossible to achieve.

Peace,
Michael

[Matt Hummel]

The ELCA (and its predecessor body, the LCA) continued to allow pension funds to be invested in companies that were in South Africa even while it was calling for divestment from companies in and investing in South Africa because of apartheid. Why? Because of the "prudent man" rule. (I heard this explained during a defense by a Board of Pensions rep during an LCA Assembly.) Even after "apartheid-free" funds were established, they continued to offer funds that had investments in South Africa. Today, when the pension plan has changed into, basically, a 403b plan, the ELCA plan (now Portico) continues to offer both "social conscience" funds and funds that don't take such issues into account when making investment decisions. (And they still got sued.)

And yes, in spite of my personal beliefs, I assume that my retirement monies are invested in drugs (including abortifacients), guns, and tobacco products. (Hopefully not wild women, but who knows?)

Erma-

Thanks.  There is also a cautionary tale in divestment, etc.  One of the products boycotted during the whole anti-apartheid period was SA lobster tails.  This was a fishery developed by Portuguese Catholics who, when they made their killing and went back to Portugal, sold their boats & equipment to the crews who had worked them  for them.  The crews were Black.  So lots of American Liberals got to feel good about themselves by not eating  something that, if they had, would have actually supported economic freedom for Blacks in South Africa.  Oh the sweet taste of irony with drawn butter.

At the upper levels of financial mergers and acquisitions, things are so intermingled that I do not believe it is possible to invest pension funds exclusively in firms that are "innocent." I would be willing to settle for using investment managers whose own policies do not act to undermine free enterprise and fair dealing. I've been told that that is also extremely difficult to investigate, if not impossible to achieve.

Peace,
Michael

Which is why it is helpful to be able to think in categories like "direct material cooperation with an intrinsic evil."

[Dan Fienen]

Where in the Constitution is the committee set up to oversee those who claim rights under the Constitution and disallow those claims to freedoms that in the judgment of the committee are hypocritical, not factually based, or are otherwise not worth supporting?  Apparently there must be such a committee that has judged that the owners of Hobby Lobby don't meet their standards and so their claims to First Amendment rights are disallowed.  After all, Constitutional rights are not for everybody, only those who measure up, right? 

[Randy Bosch]

The self-anointed "best people" have given themselves the liberty to edit the Constitution (and other documents more germaine to these various threads, apparently).  After all, "No man . . . can really or ultimately desire anything but what the best people desire. This is the principle of the higher snobbery; and in fact, all earnest liberals are higher snobs. If you refuse to move in the prescribed direction, you are not simply different, you are arrested and perverse. The savage must not remain a savage, nor the nun a nun, and China must not keep its wall. If the animals remain animals it is somehow through a failure of the will in them, and very sad. Classic liberty, though only a name for stubborn independence, and obedience to one's own nature, was too free, in one way, for the modern liberal." George Santayana in "The Irony of Liberalism". (Santayana's bit of - is it irony or sarcasm or both - laying bare "the element of social presumption that stands behind the liberal's habit of coercion)".

[Norman Teigen]

TO:  MattHummel:  Why do you so frequently mention the ELS in your various posts?  What is your point in doing so?

[Matt Hummel]

Apparently you & I have different definitions for frequent.

When I do mention it, I do so because of your (to me) histrionic concerns over its infiltration at the top by those who would sell out its proud Reformation heritage for a mess of pottage that is the VRWT (Vast Right Wing Theocracy).  I love the way Leftists tell themselves campfire stories of that terrible Monster.

That, and when I did some research on it, not having heard of it until your posts, I found out that it was the size of about three of the parishes within a mile or so of my house.  So it's kinda cute.  I like the Arthur Dent like determination to stop the bulldozer (Google Douglas Adams if you don't get the reference).  Keep up the good work!

[Steven Tibbetts]

At the upper levels of financial mergers and acquisitions, things are so intermingled that I do not believe it is possible to invest pension funds exclusively in firms that are "innocent." I would be willing to settle for using investment managers whose own policies do not act to undermine free enterprise and fair dealing. I've been told that that is also extremely difficult to investigate, if not impossible to achieve.

How is a (potential) holder of shares in a mutual fund supposed to discover which particular investments a mutual fund actually holds?  I've read prospectuses; I've read the reports mutual funds issue.  Funds are often establish rules that direct fund managers towards or away from investing in particular instruments.  Sometimes in reporting, large investments (generally by percentage of the fund itself) in particular firms or instruments are identified; more often they are reported by "sector," rather than particular instruments.  OF course, by the time reports are distributed, actual investment may have change.  Apart from index funds, the particular instruments most mutual funds will hold can change often, even daily or more often, depending upon how actively the fund is managed.

The management of retirement funds for which a company is fiduciary is supposed to be kept very separate from the management of the company's funds.  Most companies, large and small, farm management out completely.  I've not read the details of these reports on how Hobby Lobby employee retirement funds are invested.  But given my 35 years of experience with other retirement plans -- going back to my Sears profit sharing plan in the late '70s, when (unlike today's plans) it still invested mainly in the stock of Sears, Roebuck and Co. -- I would be quite surprised if the principals of Hobby Lobby micromanage their employees' retirement funds, though the accusatory headlines seem to presume (and clearly want their readers to think) that they do.

spt+

[Norman Teigen]

Well, maybe they don't choose to  micromanage the 401k programs of the Hobby Lobby employees, but it certainly appears that they would like to micromanage their sex lives.  Is this not hypocrisy?

[Randy Bosch]

Well, maybe they don't choose to  micromanage the 401k programs of the Hobby Lobby employees, but it certainly appears that they would like to micromanage their sex lives.  Is this not hypocrisy?

I removed my previous post, but you beat me with your response.  You still persist in characterizing this case as a micromanagement of employees' sex lives despite, as I said in my removed post, multiple sourced clarifications and corrections by others.  Why?  I'm beginning to think that there is a larger or different underlying issue in this for you, but cannot even fathom what it might be.

[scott8]

Well, maybe they don't choose to  micromanage the 401k programs of the Hobby Lobby employees, but it certainly appears that they would like to micromanage their sex lives.  Is this not hypocrisy?

I removed my previous post, but you beat me with your response.  You still persist in characterizing this case as a micromanagement of employees' sex lives despite, as I said in my removed post, multiple sourced clarifications and corrections by others.  Why?  I'm beginning to think that there is a larger or different underlying issue in this for you, but cannot even fathom what it might be.

Saying that refusing to pay for someone's contraception amounts to "micromanaging" their sex lives is, well, hard to take seriously.

[Chuck]

Oh but I do, "Chuck".  So please stop trolling me, and perhaps read carefully what I have previously written, AND what Hobby Lobby is arguing, AND the specific accusation of hypocrisy being leveled at them (repeated uncritically by Mr. Teigen).

What's with the quotation marks? Are you incapable if reading a name or a signature? Or is it just your nature to be disagreeable?

Yes, it might be more morally consistent for them not to offer such investment options in their 401K plan, and yes of course, they have control over that--I am fully aware of that, and was when I wrote what I did previously.

Yet you previously wrote:

That it is the employee who makes the investment decision, not the employer.  UPDATE (anticipating): even for the company match.

So which is it? The employee or the employer. You seem to be very confused.

And speaking of trolls, maybe it's not a good thing to accuse the moderator of being one.  Just saying.

Yes. You would seem to be an expert.

[MaddogLutheran]

Well, maybe they don't choose to  micromanage the 401k programs of the Hobby Lobby employees, but it certainly appears that they would like to micromanage their sex lives.  Is this not hypocrisy?

How exactly does Hobby Lobby not wanting to pay directly for certain contraceptive insurance coverage amount to micromanaging an employee's sex life? Thanks in advance.

Sterling Spatz