The Mess That Is the Hobby Lobby Case

Why are you attacking them for the 401k? It's a 401k...the company isn't "collecting profits from" anything in there (whereas they would directly be paying for the insurance).

Forgive my ignorance, I am not american and we don´t have 401k in the country I live. But at some point, the money does end in someone´s pocket right? Surely, it doesn´t evaporate.

It doesn't evaporate at all. The money is contributed by the employees through a recurring deduction from their paychecks. They then have the option to invest this money in any of a number of investment choices (typically they do not have access to the full universe of investment options that you would in a normal private brokerage account, but there are generally a few dozen mutual fund choices).

The plan is administered by a third-party (not the employer). While the employer theoretically gets to choose which mutual fund options to make available in the plan, they also have a fiduciary duty - and excluding things like S&P 500 index-tracking mutual funds because one of the components is a grocery store that happens to sell pornographic magazines arguably would run afoul of that fiduciary duty.

But the important distinction, for me, is that the employees are contributing their own money and making their own investment decisions where any and all profits earned are theirs (not the company's). So I don't understand attacking the company for not limiting what their employees do with their own money.

One would assume the Greens would be participating in the 401(k) plan as they are employees of the corporation.

Also employee matching shares (3% usually) are purchased from corporate profits.

I suppose would could make the case they were ignorant of these investments, but their are well know mutual funds that specifically don't invest in these companies for this exact reason.

Just because they (may or may not) participate in the plan doesn't necessarily mean that they are invested in the specific funds that Joshua has called them out about. I would imagine one or more of the plan options is a government bond fund. These people already have significant equity exposure through their Hobby Lobby stake - it wouldn't surprise me at all if they had a large percentage of their other assets in fixed income instruments. That would probably be quite prudent, actually.

That's sort of the (albeit poorly stated on my part) subtle point; an allusion to Matthew 7:12, "For in the same way you judge others, you will be judged, and with the measure you use, it will be measured to you."

It is the very argument Hobby Lobby itself made in their court filings. The store said that even though the contraception mandate didn't require them to actually pay for contraception directly (just offer an insurance product that included it on the list of potential services), and even though the money went into a general pool with countless millions of other non-Hobby Lobby employees, and even though contraception would only be paid for if the individual employee, who was also contributing her money to the health insurance pool with a company match on the expenses opted to allocate her health care dollars to it, the Green family argued that this wasn't sufficiently attenuated as a second or third order effect. That this much-removed end purchase of contraception, which included the employee's own funds, was effectively no different than if they, themselves, had to hand out birth control pills.

They are almost the same number of steps removed from the 401(k) allocation decisions employees make with their own money as they are from the contraception decisions employees make with their own money, yet they insist that they are directly responsible for the latter while taking no responsibility for the former. They can't have it both ways.

Thank you for the response and edit - I can at least see where you're coming from now.

The biggest distinction I can draw between the 401k and health insurance is the issue of primacy. With the health insurance, your money is being routed directly to the provider of the product or service which you find objectionable. With the investments, however, your money will very rarely be going to the actual company you object to. When you buy a share in Teva Pharmaceutical, your money is going to another individual or institution, not to the company.

Financially, buying a product from the company gives that company more money to expand and (as far as the objector is concerned) kill more innocent babies. But if I buy a share in that firm from another investor, two things happen. First, I get a say in how the company is run. I get to show up at the annual meeting every year and make them answer for the impact they're having on the world. Secondly, I get to take money away from them. I get to encourage them to raise their dividend payout ratio, so they have less cash available to expand and (from the perspective of the objector) kill more innocent babies.

Honestly, that's my biggest objection (generally speaking) to how people run "socially responsible funds." If I were a "socially responsible" investor, I would want to own as much (Exxon, Altria, Diageo, Wynn, Teva, I mean pick your poison) as I possibly could, so I could have a larger say in how they do business.

I feel the same way ("If I were a "socially responsible" investor, I would want to own as much (Exxon, Altria, Diageo, Wynn, Teva, I mean pick your poison) as I possibly could, so I could have a larger say in how they do business.") If I were running an anti-smoking foundation, and tobacco stocks had the biggest dividends, I like the almost poetic symmetry of using the very tobacco profits to fight the tobacco company, potentially getting on the board, too, to shape policy.

That's probably a bad example since I don't have the same moral objections to tobacco a lot of people do, at least in developed countries where bans on advertising to children are in place with minimum age limits on purchases.

The only position in my portfolio that causes me discomfort is one I can't directly control as it is held by an insurance subsidiary of Berkshire Hathaway. It drives me nuts that Graham Holdings [GHC], the successor corporation left over after Jeff Bezos bought The Washington Post, is 27.71% owned by the conglomerate so that I indirectly have quite a bit of money invested in it. Reading the 10K filings makes me feel like I should take a shower. I view it as nothing more than a politically lobbying organization that tries to bribe Congress into blocking any reforms at for-profit universities or student loan laws, while simultaneously signing up minority students who will never graduate for substantial non-dischargable debt burdens. It preys on the hopes and dreams of would-be first generation college students. I don't like it. I don't like it at all. The only consolation is one of scope. At around $1.3 billion in market value, it's a rounding error on Berkshire's $221.9 billion net worth and $484.9 billion in assets.

I agree. It's misleading to look at the 401k holdings. Employees likely have an influence over which funds (and therefore stocks) they hold.

The larger point here is something you brought up about being most vulnerable to healthcare costs when you're most financially vulnerable. Our system is a bastardization of capitalism and socialism. We need to pick a side and stick with it rather than try to push them together.

I just responded to Scott McCarthy's earlier, same note. It's my fault for not being clear as to why I think an otherwise non-noteworthy objection (401k) allocations are relevant in this case. I'm going to update the post to expand on it.

Normally, I wouldn't find this worthy of mention except for the explicit arguments the Greens used in front of the court, which can be found in the briefs. Even though the contraception mandate didn't require them to actually purchase contraception, merely opt for an insurance provider that offered it (as all new plans do under the health care reform act), and even though the employees were contributing their own out-of-pocket money to their health insurance costs, and even though the employee is the one who gets to make the allocation decision about which services she uses, including contraception, the Green family argued that this was not sufficient attenuated; that this second or third order potential purchase of contraception by an employee, partially with her own money, simply by virtue of being through a plan it put together and partially subsidized, was no different than they themselves facilitating an abortion. It's the standard they themselves set when limiting their employee's options. It seems only fair they be judged as prescribed in Matthew 7:2: "For in the same way you judge others, you will be judged, and with the measure you use, it will be measured to you."

If they want to be held responsible for decisions their employees make partially with company funds based on providers they arrange, the mutual fund assets are fair game as the process and distance is nearly identical.

Joshua,

Love your blog. Made the pasta with basil butter sauce....sooo good!

I would like to hear your take on implicit vs. explicit cooperation and the levels of freedom in a given choice. sorry if you covered this somewhere else.

Is walking to the drug store and buying contraceptives for yourself equal to owning an index fun in your 401k? Are you actively choosing to support those companies by owning an index or mutual fund?

Seems to get pretty hazy and I understand if you throw it on the "too hard" pile.

Thanks for all you do,
Jonathan

This reminds me of a big discussion going on where I live. Apparently, there are many charitable organizations here, such as the Red Cross, that have amassed enormous sums of money and invested them in mutual funds that own stocks in weapon manufacturers and other companies that they openly criticize. They claim to be helping children in countries troubled by war, but at the same time, they have a stake in the companies making the ammo that is being used in the very same wars. Worst of all, a study showed that less then 25% of the money donated actually ended up being used for charitable causes.

I know it´s completely different from the focus on the article, but interesting none the less I hope.

Who would have guessed that a product used by 50% of the population for at least some time in their lives would be a good financial investment? I also question the judgement of companies like Hobby Lobby who make such a fuss over issues that were settled in the prior century.

which product?

As a person who knows a little bit about ERISA, Hobby Lobby would have a
huge issue with the DOL if they didn't offer index funds or if they only offered socially responsible funds in their 401-k. You could argue that they should and then fight the DOL, as they did fighting the health care case.

I guess "settled" means that it is settled with the people who agree with you view point. Interesting mental model (?) going on there as it is often a tactic the left uses to shut down a conversation and belittle people who disagree with their view point. I have no problem with birth control, but I can also respect Hobby Lobby's religious belief even if I don't necessarily agree with it. I bring this up, since the Affordable Healthcare Act is fairly recent legislation, and the issue wasn't settled in the previous century.

You were trying to respond to @disqus_6cZNx2PPio:disqus but accidentally posted a top-level comment. I tagged him so he'd be notified of your reply to his post given you reference his "settled" comment.

(Not to jump into your conversation since you weren't talking to me, but you raise an interesting point on ERISA. I think, as you allude, Hobby Lobby could have gotten around it. Congress specifically granted a religious exemption in 29 U.S.C. § 1002(33) that, like the contraception exemption, was only offered to religious organizations organized under certain parts of the tax code, but expanded this in 1980 to define a "church plan" as any plan covering an organization that "shares common religious bonds and convictions with a church" [ref: 26 U.S.C.
§ 414(e)(3)(D); 29 U.S.C. § 1002(33)(c)(4)], which is a loophole big enough one could drive a Mack Truck through it. If Hobby Lobby really felt that strongly about it (and I think they probably do), why didn't they file a challenge decades ago asking for the same ability to exclude abortion-related profits from their employee benefit plans? The only reason I can conclude is there is an incentive bias going on in that they don't want to risk lower returns or the difficulty of it. If the sole concern is abortion, rather than a laundry list of things, it can be done. It's not easy, but it can be done. The multi-billion dollar Ave Maria funds, which was backed with the financial investment of the Catholic Dominoes Pizza founder, offers such money management services and have compounded at decent rates.)

You write: “Go grab a Bible off your bookshelf and open it. What sits on the page in front of you is one of the oldest abortion rituals recorded in human history, presumably sanctioned by God Himself and given to Moses. If you believed your wife cheated on you but had no evidence, you take her in for the trial. If she did, the Lord would cause her to miscarry, the child die within
her, and make her womb dry up so she became barren.)”

I opened a bible and found, that it does not say that it causes the wife to miscarry, it doesn’t even say that the she was impregnated by the adulterer, all it says is, that she had sexual relationship with someone other than her husband, and as punishment the water will “make her womb dry up”.

I think this is some form of confirmation bias.

By definition it can't be confirmation bias since I, myself, am pro-life, or at least very closely adhere to the pro-life side of the spectrum based on the rational arguments. How can one confirm something one doesn't, personally, believe?

It's years of private Bible school and university theology. The passage refers to something known as the "Ordeal of the bitter water", with one of the most common interpretations from scholars of the original language being that it was a form of abortion and sterilization.

A stronger argument for someone who were both pro-choice and a Christian would be Exodus 21:22-25. The most direct translation is something like: "If people are fighting and hit a pregnant woman and she
has a miscarriage, the offender must be fined whatever the woman's husband demands and the courts permit. But if the woman is seriously injured, you are to take life for life, eye for eye, tooth for tooth, hand for hand, foot for foot, burn for burn, wound for wound, bruise for bruise."

God quite clearly values a killed fetus as a monetary fine not worthy of any retribution, whereas a killed adult woman would require the death penalty.

What's particularly interesting is since so many modern Christians have become pro-life in the abortion debate, many interpretations now outright lie and translate "miscarriage" as "give birth prematurely" or "god into labor"; e.g., go pick up the New International Version put out since 2011 and it's outright lying about the text for the sake of the political views of its customers.

The way you wrote the post looked like you were pro choice, which is my mistake and I should of known better after reading many of your posts and articles at about.com which are very clearly written and and shows the brilliants of the author. that is why it bothered me that you wrote something that I believe is not accurate.

This is a link to the original Hebrew with an English translation http://www.mechon-mamre.org/p/pt/pt0405.htm

I know Hebrew well (I am an orthodox jew), and as I wrote earlier, it is true that in the original Hebrew it says that it is a form of sterilization, but it does not say it is a form of abortion. and I don't know from where the scholars learned that it is an abortion. it doesn't even say that she was pregnant, (see the words used in Genesis: 38: 24).

thanks for responding

I wanted to have sex with your mind after I finished the second paragraph.

We'll see where the Roberts court runs with this in the future. There's been a tendency toward the kind of narrowness in judicial opinions that we used to see predominantly only with the swing justices (O'Connor, and now Kennedy.) This explains why we now have concurrences that come from Scalia or Thomas lamenting that the Court has refused to settle the broader question before it that is properly the function of, well, a Supreme Court. It explains the number of unanimous decisions we seem to be getting ... because Roberts seems able to get them to rule on something everyone can agree on. All of this sounds good in principle, but I think they're just kicking the can down the road.

I can see both sides. I've always admired O'Connors' instinct to decide only what was necessary. But on the other hand, what is the point of a Supreme Court that won't reach the constitutional questions? Why take cases that lower courts can decide based on technicalities or standing?

You had me at, "It is irrational to tie health benefits to employment." I still remember beating my head against the wall when people were shouting about insurance companies not covering this or that. It was the employers that made the policies, not the insurers! Insurance companies will cover whatever you want if your premiums are high enough.

Here's an idea -- if you want to have control over what you can buy, pay for it yourself.

Joshua, one thing that might help clarify this post.

You state: "Those who want it can easily get it. According to Planned Parenthood, birth control costs $15 to $50 per month. Median household income in this country is $52,000 per annum. We’re talking about less than the typical family spends on tobacco in the same time period! There is no substantial burden. In America, no one who seriously wants birth control, be they male or female, goes without it. Even if you earn minimum wage and have no health insurance, it is not some Sisyphean task to get your hands on contraceptives."

It can be confusing when you use the words "substantial burden" as part of your argument for individuals to access birth control because that specific phrase is part of the test for making a claim under the Religious Freedom Restoration Act. In RFRA cases, it is about measuring the substantial burden imposed on the exercise of religion by the state. The substantial burden test isn't about measuring the hardship for the individual seeking birth control access, but rather, measuring the hardship imposed by state action against the exercise of religion. The wording of your post makes it sound to me like the former rather than the latter.

Also, could you clarify what you mean by "fair game" when you mention the ownership of pharmaceutical companies on the balance sheet? Do you mean morally relevant for asserting a charge of hypocrisy, or legally relevant for interpreting what action should be permitted for Hobby Lobby under RFRA?

That's a good point on the wording. I'll change it to something that couldn't cause a potential misunderstanding, such as "meaningful burden". Thanks for the suggestion.

Re: Your question. I mentioned it in the comments section (I should have been much clearer when I originally wrote the post) but it comes down to a moral argument. Normally, I wouldn't find it worthy of condemnation except for the explicit position the Greens used in front of the court, which can be found in the briefs. Even though the contraception mandate didn't require them to actually purchase contraception, merely opt for an insurance provider that offered it (as all new plans do under the health care reform act), and even though the employees were contributing their own out-of-pocket money to their health insurance costs, and even though the employee is the one who gets to make the allocation decision about which services she uses, including contraception, the Green family argued that this was not sufficient attenuated; that this second or third order potential purchase of contraception by an employee, partially with her own money, simply by virtue of being through a plan it put together and partially subsidized, was no different than they themselves facilitating an abortion. It's the standard they themselves set when limiting their employee's options. It seems only fair they be judged as prescribed in Matthew 7:2: "For in the same way you judge others, you will be judged, and with the measure you use, it will be measured to you."

Joshua, one thing that might help clarify this post.

You state: "Those who want it can easily get it. According to Planned Parenthood, birth control costs $15 to $50 per month. Median household income in this country is $52,000 per annum. We’re talking about less than the typical family spends on tobacco in the same time period! There is no substantial burden. In America, no one who seriously wants birth control, be they male or female, goes without it. Even if you earn minimum wage and have no health insurance, it is not some Sisyphean task to get your hands on contraceptives."

It can be confusing when you use the words "substantial burden" as part of your argument for individuals to access birth control because that specific phrase is part of the test for making a claim under the Religious Freedom Restoration Act. In RFRA cases, it is about measuring the substantial burden imposed on the exercise of religion by the state. The substantial burden test isn't about measuring the hardship for the individual seeking birth control access, but rather, measuring the hardship imposed by state action against the exercise of religion. The wording of your post makes it sound to me like the former rather than the latter.

Also, could you clarify what you mean by "fair game" when you mention the ownership of pharmaceutical companies on the balance sheet? Do you mean morally relevant for asserting a charge of hypocrisy, or legally relevant for interpreting what is permitted under RFRA?