The US Department of Labor (DOL) has withdrawn prior guidance from 2023 supporting racial equity programs aimed at increasing racial diversity in a plan’s asset manager pool. That prior guidance had provided comfort to plan sponsors with vendor diversity programs that offering such a program would not necessarily be disfavored by the DOL. In Advisory Opinion 2025-01A, the DOL expressly rescinded its 2023 advisory opinion.
The 2023 advisory opinion (which we analyzed in a prior blog post) had offered a limited endorsement of an ERISA plan fiduciary’s practice of considering a plan sponsor’s diversity programs when evaluating what asset manager to retain. The particular racial equity program addressed in the 2023 advisory opinion provided that the plan sponsor (rather than the plans) would pay all or some of the management fees for diverse managers retained by the plans, which would be considered by the fiduciaries as part of the manager selection process, thereby possibly placing a thumb on the scale for the committee in selecting such managers. The 2023 advisory opinion answered three discrete fiduciary-related questions regarding that program and found that the fiduciary’s consideration of the program was consistent with ERISA.
With the new 2025 opinion, however, the DOL focuses on the underlying legality of the vendor diversity program itself—declaring that the diversity program constituted unlawful discrimination in violation of federal civil rights laws. As a result, the DOL rescinded the prior opinion in its entirety (without reaching any ERISA-specific conclusions) and directed the plan sponsor “take immediate action to end all illegal activity” within the vendor diversity program. The DOL concluded, “ERISA does not shield [the plan sponsor] or the fiduciaries of the Plans from the application of the civil rights laws.”
Plan sponsors and fiduciaries should be aware that the 2023 advisory opinion no longer represents the DOL’s position and should not be cited as support for incorporating or maintaining racial equity criteria in service provider selection. While the 2025 opinion leaves open questions about how such programs might be evaluated under ERISA, it makes clear that the legality of the program itself is a threshold issue. Sponsors considering supplier diversity initiatives may wish to reevaluate their programs and consult legal counsel to assess compliance with applicable civil rights laws.
How We Can Help
Morgan Lewis regularly advises plan sponsors, fiduciaries, and service providers on navigating the evolving legal landscape surrounding ERISA compliance. Our team can assist in reviewing supplier diversity programs, assessing litigation and regulatory risk, and developing compliant procurement strategies. Please contact the authors of this post or your regular Morgan Lewis contact for guidance tailored to your organization’s goals.