DOL issues proxy voting guidance

On April 1, 2026, the Department of Labor published Technical Release 2026-01, “Application of ERISA Fiduciary Requirements and Preemption Provisions to Proxy Advisory Services.” We provide a brief note on DOL’s guidance.

Background

The DOL guidance is responsive to President Trump’s Executive Order “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors,” instructing DOL to:

[R]evise all regulations and guidance regarding the fiduciary status of individuals who manage, or, like proxy advisors, advise those who manage, the rights appurtenant to shares held by plans covered [by ERISA and] … consider whether these proposed revisions should include amendments to specify that any individual who has a relationship of trust and confidence with their client, including any proxy advisor, and who provides advice for a fee or other compensation, direct or indirect, with respect to the exercise of the rights appurtenant to shares held by ERISA plans, is an investment advice fiduciary under ERISA.

Why this matters to plan sponsors

Generally, plan fiduciaries are responsible, as fiduciaries, for the selection of plan service providers, including, e.g., a proxy advisory service, regardless of whether the service provider is a fiduciary. Technical Release 2026-01 describes situations in which the proxy advisory service may itself be a fiduciary, and thus subject to, e.g., ERISA’s prudence and exclusive purpose/loyalty rules.

If the proxy advisory service is itself a fiduciary, that may (1) add another defendant to any fiduciary lawsuit related to proxy voting (see, e.g., the Spence v. American Airlines litigation), and (2) trigger ERSIA co-fiduciary liability.

The intent of this guidance – which generally restates current law – is to warn proxy advisory services that they may be subject to the same rules with respect to proxy voting, e.g., with respect to climate change shareholder initiatives (again, see the Spence v. American Airlines litigation), that currently apply to employer-fiduciaries.

When a proxy advisory service may be a fiduciary

DOL identifies two situations in which a proxy advisory service may be a fiduciary:

• Functional fiduciaries. When they “exercise authority or control over shareholder rights attributable to shares that are ERISA plan assets, including the voting of proxies,” e.g. when they “retain ultimate discretion and control over … voting policies and/or the casting of votes.”

• Advice fiduciaries. When the advice they provide, under “five-part test” for advice fiduciary status, makes them an ERISA advice fiduciary. Generally, a person is an advice fiduciary where they:

(1) render advice as to the value of securities or other property, or make recommendations as to the advisability of investing in, purchasing, or selling securities or other property; (2) on a regular basis; (3) pursuant to a mutual agreement, arrangement, or understanding with the plan or a plan fiduciary that; (4) the advice will serve as a primary basis for investment decisions with respect to plan assets; and that (5) the advice will be individualized based on the particular needs of the plan.

In this regard, DOL states that in its view, “proxy advisory services concerning how to exercise shareholder rights based on the particular needs of an ERISA-covered plan on an ongoing basis, if rendered for a fee pursuant to a mutual understanding, will ordinarily satisfy the five-part test.” And DOL “reminds and cautions both plans and proxy advisory firms that mere written disclaimers … are not necessarily determinative.” There are those (especially the advisory firms themselves) that are likely to question both of these assertions.

Preemption

DOL also provided its view that laws “limiting or regulating the use of non-financial objectives in securities recommendations or investment advice by financial advisors, including proxy advisory firms” are not preempted by ERISA, finding that they are “nonconvergent with ERISA or plans governed by ERISA.” DOL reasoned:

A proxy advisory firm covered by such a law is not permitted to come within its ambit when providing services to an ERISA plan because ERISA imposes even stronger consumer protections in the form of fiduciary protections, including a bar on taking into account anything other than the exclusive purpose of providing benefits to participants and beneficiaries by maximizing risk-adjusted returns. [Emphasis added.]

In plainer English, DOL is saying that an ERISA fiduciary will always be subject to the stricter ERISA fiduciary rules and therefore cannot consider “non-financial objectives.” As a result, an ERISA plan/plan fiduciary could not be subject to one of these state laws.

That – particularly the highlighted language setting a fiduciary standard of “maximizing risk-adjusted returns” – is (arguably) the most robust statement of the limits on, e.g., ESG-influenced fiduciary proxy voting and investment decisions, that has thus far surfaced and may be an indication of how the (Trump) DOL intends to revise current ESG rules.

Practically

As a practical matter, sponsor fiduciaries will want to review their current relationships with proxy advisory firms in light of this guidance and discuss with any proxy advisor to the plan its view of its fiduciary (or non-fiduciary) status.

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We will continue to follow this issue.