DOL casts its vote on proxy advisers’ status as ERISA fiduciaries
Background on EO’s directives to DOL
DOL’s longstanding view is that exercising shareholder rights with respect to plan investments — for example, voting proxies on securities held by the plan — is a fiduciary function. These actions must be performed prudently and solely in accordance with the plan’s economic interests. When determining how to vote proxies, investment fiduciaries often consider proxy advisory firms’ research and recommendations.
Last year’s EO instructed DOL to “take steps to revise all regulations and guidance” on the fiduciary status of individuals who manage or — like proxy advisers — advise those who manage a plan’s exercise of shareholder rights, including proxy votes and corporate engagement. The EO specifically directed DOL to consider whether to specify that proxy advisers’ recommendations are fiduciary investment advice. The EO is part of the Trump administration’s broader campaign to limit the influence of proxy adviser firms and discourage diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) investment practices (see Executive order calls for changes to ERISA proxy voting rules (February 19, 2026).
Proxy advisers’ fiduciary status
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Definition of proxy advisory firmThe EO didn’t include a definition of proxy advisers. In a footnote in the guidance, DOL defines a “proxy advisory firm” as “any entity that offers advice or recommendations for a fee to shareholders on how to vote on corporate proxy ballots.” This would include recommendations for voting on board member elections, management proposals, and shareholder proposals. DOL indicates that an entity meeting this definition will be a proxy advisory firm even if it doesn’t hold itself out as a proxy adviser.
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Proxy advisers as discretionary fiduciariesUnder ERISA, a person who exercises any discretionary authority or control over a plan’s assets is a fiduciary. DOL considers shareholder rights associated with securities held by a plan to be plan assets. In the guidance, DOL suggests that proxy advisory firms sometimes have ultimate discretion or control over a plan’s exercise of shareholder rights or proxy voting policies. DOL explains that proxy advisory firms will be fiduciaries to the extent they exercise authority or control over a plan’s shareholder rights.
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Proxy advisers as investment advice fiduciaries
Anyone who provides investment advice for a fee or compensation is also an ERISA fiduciary. Since the EO’s issuance, DOL formally reinstated its longstanding regulatory definition of fiduciary investment advice from 1975. Under that regulation, individuals and companies act as investment advice fiduciaries if they meet both of the following conditions:
- Receive direct or indirect compensation for giving advice about the value of securities or other property of a plan or for making recommendations to the plan about investing in, purchasing, or selling securities or other property
- Render that advice on a regular basis under a mutual agreement, arrangement, or understanding (whether written or otherwise) that the advice will serve as a primary basis for the plan’s investment decisions and be individualized for the plan’s particular needs
DOL explains that proxy advisory firms generally would be investment advice fiduciaries if they receive compensation for providing ongoing services to a plan about exercising its shareholder rights and the services meet the regulation’s other conditions (i.e., they are based on the plan’s particular needs and reflect a mutual understanding that they will serve as a primary basis for the plan’s investment decisions).
Whether a proxy advisory firm’s services satisfy those conditions depends on the facts and circumstances. DOL indicates that the existence of a contractual arrangement between a plan and proxy advisory firm may be a relevant factor in determining whether there is a mutual understanding that the firm’s services will serve as a primary basis for the plan’s investment decisions. The guidance also cautions that written disclaimers of a proxy adviser’s fiduciary status aren’t determinative.
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Emphasis on duty of loyaltyDOL emphasizes that proxy advisers acting as fiduciaries are subject to ERISA’s duty of loyalty, which requires fiduciaries to act for the exclusive purpose of providing benefits to participants and beneficiaries. This echoes one of the themes in a recently issued field assistance bulletin (FAB) announcing new guiding principles for the agency’s ERISA enforcement activity. The FAB provides that DOL will prioritize investigations where there is direct evidence of breaches of the duty of loyalty by plan fiduciaries. According to the FAB, this includes actions to advance goals unrelated to participants’ best interests, such as the promotion of ESG objectives.
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Potential for co-fiduciary liabilityPlan fiduciaries already have a duty to prudently select and monitor vendors on an ongoing basis, even when those vendors aren’t acting as fiduciaries. However, under ERISA’s co-fiduciary liability provisions, plan fiduciaries may in certain circumstances have liability for another fiduciary’s breach. This could include situations where plan fiduciaries rely on recommendations or advice from proxy advisory firms acting in a fiduciary capacity. In light of DOL’s increased scrutiny of proxy advisory firms, plan fiduciaries may want to consult with legal counsel to ensure that appropriate vendor-monitoring processes are in place to mitigate the risk of potential co-fiduciary liability.
State disclosure laws aren’t preempted
ERISA (29 US Code § 1144) generally preempts “any and all state laws” to the extent they “relate to” employee benefit plans. While not mentioned in the EO, the guidance addresses whether ERISA preempts state laws that require proxy advisers to disclose when the adviser’s research or recommendations include consideration of “non-financial factors” (a term the guidance doesn’t define).
DOL concludes that these types of state laws generally aren’t preempted when proxy advisory firms are acting as ERISA fiduciaries. DOL explains that ERISA requires fiduciaries to prioritize maximizing risk-adjusted returns and prohibits them from offering “nonfinancial advice.” As a result, a proxy adviser’s fiduciary duties “would preclude it from acting in a way that would trigger disclosure (providing nonfinancial advice) under such a law.” However, the guidance doesn’t address firms providing proxy advisory services in a nonfiduciary capacity.
Biden-era proxy voting rule remains in effect
Related resources
Non-Mercer resources
- Technical Release 2026-01 (DOL, April 1, 2026)
- News release (DOL, April 15, 2026)
Mercer Law & Policy resources
- DOL revives narrower definition of fiduciary investment advice (May 7, 2026)
- DOL tightens oversight of ERISA enforcement activities (April 28, 2026)
- Executive order calls for changes to ERISA proxy voting rules (February 19, 2026)
- On second thought, DOL has softer touch with ESG investing rule (December 13, 2022)
- A primer on ERISA’s preemption of state laws (March 22, 2022)