Publication
Proxy Advisors, the New Plan Fiduciaries on the Block
Retirement plan sponsors frequently engage proxy advisory firms to provide advice (or to make decisions) as to whether and how to vote proxies for the plan’s underlying investments. On April 1, 2026, the Department of Labor (the “DOL”) released Technical Release 2026-01 (the “Release”), which provides fiduciary guidance related to proxy advisory firms, as discussed below. A related news release explains that the Release was issued following President Trump’s December 2025 Executive Order 14366: Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, which in part directed the DOL to take steps to strengthen Employee Retirement Income Security Act (ERISA) fiduciary standards for proxy advisory firms and to enhance transparency regarding proxy advisors and Diversity, Equity, and Inclusion (DEI) and Environmental, Social, and Governance (ESG) investment practices.
The Release provides clarity on two points:
- First, the Release clarifies that proxy advisory firms are generally subject to ERISA’s fiduciary requirements to the extent that they: (1) exercise authority or control over shareholder rights, including the voting of proxies; or (2) provide advice for a fee to ERISA plans about how such plans should exercise proxy voting rights. The DOL’s view is that proxy advisory firms performing such functions will “ordinarily” satisfy the DOL’s existing five-part test for identifying ERISA investment advice fiduciaries. The Release, however, recognizes that the analysis still depends on the facts and circumstances.
Notably, this clarification comes shortly after the DOL reverted to the narrower 1975 five-part test for determining who qualifies as an investment advice fiduciary under ERISA, as discussed in our SW Benefits Update, “Back to the Future: DOL Reinstates 1975 Fiduciary Test.” While the reversion to the 1975 five-part test generally narrows the universe of ERISA fiduciaries, the DOL is simultaneously signaling through the Release that proxy advisory firms will “ordinarily” satisfy that same narrow test based on their typical business practices.
- Second, the Release clarifies that ERISA’s broad preemption clause generally does not preempt state laws that require proxy advisory firms to make investor disclosures when the firm makes recommendations other than for the purpose of maximizing risk-adjusted returns. The Release suggests that the DOL is providing this clarification in light of state regulators increasingly focusing on limiting the use of non-financial objectives in securities and investment recommendations. The Release also cautions, however, that whether ERISA preempts a particular state law depends on the specifics of such law.
Takeaways for Retirement Plan Sponsors
In light of the Release, plan sponsors should consider:
- Reviewing the terms of their plan document and investment policy statement to determine who has authority to make decisions regarding proxy voting;
- Reviewing any agreements in place with proxy advisory firms to confirm the agreement: (a) clarifies the proxy advisory firm’s role and whether the firm’s advice will serve as a primary basis for investment decisions, (b) adequately recognizes the appropriate fiduciary status of the proxy advisory firm, and (c) requires the proxy advisory firm to act in accordance with their ERISA fiduciary obligations, if applicable; and
- Continuing to monitor the Trump Administration’s efforts to restrict fiduciaries from considering non-financial objectives (e.g., DEI and ESG objectives) for plan investments, to the extent the plan or investment policy statement allows fiduciaries to consider such objectives.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 17 locations throughout the United States and in Mexico, including Phoenix and Tucson, Arizona; Los Angeles, Orange County, Palo Alto and San Diego, California; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno-Tahoe, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
