This is one of those interesting topics in benefits law and I do not believe there is a clear answer. I would note the following: In addition to hiring and employment generally, the Supreme Court has determined that Title VII of the Civil Rights Act is also applicable to employee benefits.(see Los Angeles Department of Water and Power v. Manhart; Arizona Governing Commission v. Morris, and Gilbert v. General Electric. See also Moran, supra at 35.) Though there appears to be no cases out of the EEOC or the courts as to whether Title VII would require an employer to provide faith-based investment options within a company’s retirement plan if requested by an employee, Beverly Moran, a law professor at Vanderbilt University who has written extensively on this issue argues that when religious accommodation collides with tax preferences offered through the Internal Revenue Code, the courts generally give Congress great deference when it bestows tax benefits in exchange for taxpayers avoiding even constitutionally protected activities. (See Beverly I. Moran, “The Right to Religious Accommodations in Pension Plans”, 2012 Cornell HR Review.) An example of such a case involved Bob Jones University where the Supreme Court held that the University was not entitled to retain its tax-exempt status based on its practice of racial discrimination.36 The Court suggested that even religious schools are not exempt charities when they practice racial discrimination. (See Bob Jones University v. Unites States, 461 U.S. 574 (1993)).Thus, I believe Prof. Moran would argue that a plan fiduciary should be required to add a faith-based investment alternative to a tax-qualified retirement plan at the request of an employee because an employer should not be allowed to practice potential religious discrimination in light of the tax benefits the employer and the qualified retirement plan receives.
