Proxy Voting Under ERISA: DOL Guidance Signals Greater Oversight—and Risk

The US Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a technical release providing targeted guidance on when proxy advisory firms could be viewed as acting as Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries and how ERISA preemption is viewed by the Department in relation to certain state disclosure laws that pertain to proxy voting. The release reaffirms, and in some respects sharpens, the Department’s views on ERISA’s fiduciary standards as applied to proxy voting and related shareholder activities.

Technical Release 2026-01 (the Release) arises in the context of a broader debate about the role of environmental, social, and governance (ESG) factors in institutional investing, which is now especially focused on proxy voting. Courts and regulators are increasingly scrutinizing not only whether proxies are voted but also how entities, particularly proxy advisory firms and ERISA fiduciaries, oversee delegated authority and service providers.

The Release also follows a December 2025 executive order that directed the DOL to consider treatment of proxy advisory firms as ERISA investment advice fiduciaries. Emerging state-level regulation of proxy advisory firms (on which we previously wrote) increasingly requires enhanced transparency into the bases for their recommendations, including disclosure of methodologies and other aspects of their decision-making processes.

DOL TECHNICAL RELEASE 2026-01: CORE GUIDANCE

The Release provides guidance by reaffirming certain Department positions and setting out positions on three issues.

Reaffirming ERISA Fiduciary Duties Apply to Proxy Voting on Behalf of ERISA Plans

First, in providing background information, the Department reaffirms its “long recognized positions” that “voting rights and other shareholder rights attributable to shares held by ERISA-governed employee benefit plans are plan assets in their own right. Accordingly, management of those rights is subject to ERISA’s fiduciary duties, including the duties of prudence and loyalty.”

The Department also reiterates its “longstanding view that the management of proxy rights is fiduciary in nature and must be undertaken for the exclusive purpose of maximizing risk-adjusted return on investment.”

Opining That Proxy Advisors Can Be ERISA Fiduciaries

A notable aspect of the Release is its focus on proxy advisory firms. The DOL clarifies that such firms could be deemed “functional fiduciaries” where they either “exercise authority or control over shareholder rights attributable to shares that are ERISA plan assets, including the voting of proxies,” or “provide advice for a fee to ERISA plans about how such plans should exercise proxy voting rights attributable to shares of stock they own.”

Importantly, fiduciary status under either of these could depend on the facts and circumstances of the relationship, not contractual disclaimers alone. This reinforces the need for careful structuring and oversight of advisory arrangements.

Observation: This appears to be the first time the Department has explicitly stated that the exercise of discretionary authority over the management of proxy voting rights or providing advice on the same could, on its own (i.e., absent other services), render a person or entity a fiduciary under ERISA. Prior Department guidance had long recognized that proxy voting itself can be a fiduciary act. The Department had not previously issued guidance on the fiduciary status of proxy advisory firms. In announcing the Release, the Department described the guidance as “first of its kind” in addressing circumstances in which proxy advisory firms may satisfy the test for fiduciary status under ERISA.

Observation: The DOL’s description of when proxy advisory firms could be fiduciaries cites to established ERISA standards, including the so-called “five-part test” for analyzing when an entity that gives advice would make a party a fiduciary under ERISA. The five-part test as described in the Release would categorize entities providing advice on proxy voting as fiduciaries if 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.”

The Release does not, however, provide additional fact patterns or other criteria to illuminate how these historic standards would actually distinguish fiduciary from nonfiduciary proxy advisory services.

State Preemption

The Release also addresses ERISA preemption, and in particular certain state laws that impose disclosure obligations on proxy advisory firms (on which we previously wrote). These state laws impose disclosure requirements tied to nonfinancial considerations and voting against management, reflecting a broader policy shift toward emphasizing pecuniary factors in fiduciary decision-making.

Weighing in on these new laws, the Release evaluates whether these state rules should be viewed as preempted by ERISA. As noted in the Release, “ERISA expressly preempts state laws insofar as they ‘relate to any employee benefit plan described in’ ERISA. 29 U.S.C. § 1144(a).”

Whether state and local laws do so “relate” has been the subject of regulatory and litigation debate throughout the years, including in the context of other state laws that sought to regulate ESG investing. For example, preemption was used to challenge other state ESG laws, including Missouri’s ESG adviser rule.

Assessing the current landscape of state proxy voting laws, the Release opines that certain of these state proxy voting laws may not be preempted by ERISA since “it is the view of the Department that, generally, a mere requirement to include disclosures to all of its investor clients when a firm’s research or recommendations take non-financial factors into consideration that covers only proxy advisory firms, does not, in and of itself, have any impact on plan administration implicating ‘connection with’ preemption.” The Department does caution “that whether any particular state law is preempted inherently depends on the specifics of that particular law.”

Observation: This appears to be the first time the Department has directly addressed the interaction between ERISA preemption principles and state proxy voting disclosure laws applicable to proxy advisory firms. While prior guidance and caselaw have historically addressed ERISA preemption in the context of state laws affecting ERISA plan administration, prior guidance did not specifically analyze whether state proxy voting disclosure regimes applicable to proxy advisory firms are preempted by ERISA. The Release represents a notable expansion of the Department’s engagement with the evolving state-law landscape surrounding ESG-related proxy voting regulation.

Observation: In issuing the Release, the Department is clearly continuing to wade into the ongoing conversation around ESG investing, which is now heavily focused on proxy voting. For example, the Release reiterates the Department’s view that ERISA plan fiduciaries must manage proxy rights for the “exclusive purpose of providing benefits to participants and beneficiaries by maximizing risk-adjusted returns.”

The Release comes at a time that the DOL has signaled a more pointed enforcement approach toward retirement plan fiduciaries engaging in ESG-related investing. For example, in April the DOL issued Field Assistance Bulletin (FAB) 2026-01, Guiding Principles for EBSA Enforcement Priorities. FABs are “written by the Office of Regulations and Interpretations to the Director of Enforcement and Regional Directors to provide guidance in response to questions that have arisen in [investigation] field operations.”

In the bulletin, EBSA confirmed that it will prioritize investigations evidencing the most egregious conduct or significant harm, such as “conduct designed to enrich themselves or other goals unrelated to participants’ best interests, such as the promotion of environmental, social, or governance objectives.”

Speaking in May, EBSA head Daniel Aronowitz emphasized that the agency will prioritize action against “bad faith” actors who misappropriate plan assets or pursue “disloyal” objectives collateral to participant benefits, explicitly identifying ESG as potential red flags.

Together these actions suggest the DOL may further scrutinize ESG investing by ERISA plans, including through proxy voting activities.

Observation: The Release creates a challenge for proxy advisory firms because, in arguing that these state rules are not preempted by ERISA, the Department suggests that any firm that makes a disclosure of nonfinancial proxy voting under a state law with respect to ERISA assets would be violating ERISA:

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—since such a law creates an obligation to provide disclosure only when offering nonfinancial advice (that is, advice based on considerations other than maximizing risk-adjusted returns).

NEXT STEPS

In light of the evolving ESG landscape, these developments further highlight the Department’s focus on ESG investing and proxy voting activities. These developments further highlight that entities that touch ERISA plans, including plan fiduciaries and those that evaluate proxy voting by such plans, may wish to consider revisiting proxy voting frameworks, focusing on oversight, documentation, and alignment with ERISA.

If you are considering how to best address the DOL’s positioning on ESG or proxy voting, please feel free to contact the authors or your Morgan Lewis contacts.