President Trump is strongly critical of proxy advisory services and last year directed several federal agencies — including the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) — to do something about it. In his December 11, 2025, executive order, President Trump stated that “proxy advisors regularly use their substantial power to advance and prioritize radical politically-motivated agendas — like ‘diversity, equity, and inclusion’ and ‘environmental, social, and governance’ — even though investor returns should be the only priority.1
Even before the executive order, DOL’s Employee Benefits Security Administration (EBSA) drew a legal “line in the sand” regarding what one of its officials termed “politicized investing,”2 reminding plan fiduciaries that ERISA does not permit them to “subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives.”3 More recently, EBSA Assistant Secretary Daniel Aronowitz announced that EBSA will prioritize civil investigations involving breaches “of the duty of loyalty [including self-dealing and conduct promoting] goals unrelated to participants’ best interests, such as the promotion of environmental, social, or governance objectives.”4
It is against this background that plan sponsors and their fiduciaries should review Technical Release 2026-01, released on April 1st. The release addresses the fiduciary status and role of proxy advisory services, raising the need to review the selection and monitoring processes of the plan fiduciaries who engage them.
What are Proxy Advisors?
Proxy advisory services are firms that recommend how to, or actually cast votes for, shareholders who do not or are unable to attend meetings for public companies, voting on issues such as board member elections, management proposals, and other shareholder proposals. Institutional shareholders pay proxy advisory services to function on their behalf. Because institutional shareholders often hold large swaths of shares, these proxy firms can exercise a large amount of influence on corporate governance.
How Does Proxy Voting Fit into ERISA?
ERISA comes into play when these proxy advisory services recommend how to vote, or directly cast votes on behalf of, shares held by employee benefit plans. DOL has long held that the voting rights appurtenant to investments held by plans are plan assets in their own right, and that deciding whether and how to vote those shares is a fiduciary obligation. As a result, the following fiduciary scenarios are possible:
- Giving advice on how to vote shares may itself be fiduciary investment advice if it meets DOL’s 1975 investment advice regulation.
- Exercising delegated authority to vote shares directly is fiduciary conduct by a proxy voting entity.
- Selecting and monitoring the proxy voting entity to whom authority is delegated is fiduciary conduct by the plan committee/named fiduciary.
What Guidance Does the Technical Release Provide?
The Technical Release splits its guidance into two parts: proxy advisory firms as functional fiduciaries under ERISA and whether state laws requiring reporting by proxy advisors are preempted by ERISA.
- Potential Fiduciary Status of Proxy Advisory Firms
The Technical Release cites DOL regulations to establish that ERISA’s duty of loyalty applies. (“The fiduciary duty to manage plan assets that are shares of stock includes the management of shareholder rights appurtenant to those shares, such as the right to vote proxies”) 29 C.F.R. § 2550.404a-1(d)(1).
Regarding voting shares, DOL wrote that it “reminds and cautions plans and proxy advisory firms that to the extent a proxy advisory firm exercises any authority or control over the exercise of shareholder rights attributable to shares owned by an ERISA-covered plan, the proxy advisory firm will be a functional fiduciary under ERISA section 3(21)(A)(i).”
Regarding advice on voting shares, DOL notes that proxy advisory firms may be investment advice fiduciaries under ERISA § 3(21)(A)(ii) if they provide investment advice for a fee. Specifically, DOL wrote:
“It is the view of the Department that, in general, 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 [1975 investment advice regulation’s] five-part test, though the ultimate analysis depends on the facts and circumstances.”
- State Reporting Laws Not Generally Preempted
The Technical Release also provides that, while each law must be reviewed specifically for its compliance, state laws requiring proxy advisory firms to disclose when they consider nonfinancial factors in making recommendations to their clients generally are not preempted by ERISA, as long as these laws apply broadly and do not specifically target ERISA plans. Because ERISA prohibits fiduciaries from considering such nonfinancial factors, DOL reasons, the requirement to disclose would not be triggered by advisors to ERISA plans.5
What Are the Key Takeaways for Plan Sponsors/Committees?
For those plan sponsors who engage with proxy advisory firms, they should evaluate whether their use of proxy advisory services triggers fiduciary status as outlined by the DOL. Moreover, any disclaimer language in service agreements will not automatically relieve any proxy advisories of fiduciary responsibility — DOL considers the substance of the relationship as determinative of fiduciary status. Plan sponsors will also want to closely monitor the actions of their proxy advisory firms.
In sum, plan sponsors should take proactive steps to ensure their proxy advisory firms understand and adhere to ERISA’s functional fiduciary requirements, if applicable, and recognize that disclaimers in service contracts will not automatically shield them or their proxy advisories from accountability. We are happy to help clients review these arrangements in light of DOL’s recent guidance and new enforcement policy.
Footnotes
- Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors – The White House
- EBSA Senior Policy Advisor Justin Danhof, September 8, 2025, https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/erisa/ebsa-addresses-trump-administration-pension-investing-priorities-at-oecd-event#f2 accessed on May 1, 2026.
- 29 C.F.R. § 2550.404a-1(c)(1).
- “Guiding Principles for EBSA Enforcement Priorities,” Field Assistance Bulletin No. 2026-01 | U.S. Department of Labor
- We note that the Technical Release does not address DOL’s “tie-breaking” provision in 29 C.F.R. § 2550.404a-1(c)(2) that permits consideration of “collateral benefits” in limited circumstances, specifically: “If a fiduciary prudently concludes that competing investments, or competing investment courses of action, equally serve the financial interests of the plan over the appropriate time horizon, the fiduciary is not prohibited from selecting the investment, or investment course of action, based on collateral benefits other than investment returns. A fiduciary may not, however, accept expected reduced returns or greater risks to secure such additional benefits.”
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