DOL Guidance Creates New ERISA Risks for Proxy Advisory Arrangements

Executive Summary

On April 14, 2026, the U.S. Department of Labor (DOL) issued Technical Release 2026-01 (TR 2026-01 or the Release), addressing the application of ERISA’s fiduciary requirements and preemption provisions to proxy advisory services. TR 2026-01 does not amend the DOL’s proxy voting regulation (at 29 C.F.R. § 2550.404a-1); however, it recontextualizes the relationships among ERISA plans, asset managers of plan asset funds, and proxy advisory firms in ways that warrant immediate review of existing arrangements.

In light of this guidance, asset managers and ERISA plan fiduciaries should consider the following actions:

1. 1. audit existing proxy advisor arrangements against each prong of the DOL’s five-part investment advice test as interpreted under TR 2026-01 to determine whether the arrangement may create an inadvertent fiduciary relationship — and whether restructuring to avoid fiduciary status is appropriate;
   2. assess potential exposure under ERISA § 405 (as a co-fiduciary) where the proxy advisor may be deemed to be a fiduciary; and
   3. monitor for future rulemakings that may amend the regulations to take a harder line on the use of non-pecuniary factors and the tiebreaker test.

Background

Proxy voting is a fiduciary function under ERISA that is governed by the investment duties regulations at 29 C.F.R. § 2550.404a-1 et seq. The first Trump administration’s 2020 amendments to the regulations required fiduciaries to act solely in accordance with a plan’s economic interest and imposed enhanced monitoring obligations for proxy advisory firms. Those amendments likely would have resulted in a dramatic increase in recusals from proxy voting by plans; however, it was superseded by a new regulation that the Biden administration promulgated in 2022. The 2022 regulation largely retained the substantive framework of the 2020 rule, but it eliminated the 2020 rule’s presumption against exercising shareholder rights and confirmed that (consistent with historic guidance) ESG factors may be relevant to a risk-and-return analysis. In 2025, the Trump DOL announced it would no longer defend the 2022 rule and would engage in a new rulemaking. The 2022 regulation remains on the books but its future is uncertain.

On December 11, 2025, President Trump issued an Executive Order (EO) directing regulatory action aimed at curtailing the influence of proxy advisors, particularly regarding DEI and ESG policies. The EO directed the Secretary of Labor to (i) revise all regulations and guidance regarding the fiduciary status of proxy advisors under ERISA, including whether a proxy advisor with a “relationship of trust and confidence” should be deemed an investment advice fiduciary; (ii) assess whether proxy advisors act solely in plan participants’ financial interests; and (iii) enhance transparency regarding proxy advisors’ DEI and ESG investment practices.

TR 2026-01 implements a portion of the EO’s directives by clarifying that proxy advisors may be fiduciaries under the DOL’s long-standing five-part fiduciary test. Note that, while the EO directed the agency to consider whether proposed regulatory revisions should include amendments to specify that any proxy advisor with a relationship of trust and confidence is an investment advice fiduciary, TR 2026-01 does not amend any regulation. It applies the DOL’s existing five-part test for being an investment advice fiduciary[1] rather than the broader “trust and confidence” standard the EO envisioned; however, TR 2026-01 instead interprets the existing test more aggressively than past guidance as applied to proxy advice. The Release also adds a preemption analysis/carveout for state laws on proxy advice disclosure that the EO did not specifically request.

TR 2026-01: Overview

TR 2026-01 states that proxy advisory firms exercising “any authority or control” over shareholder rights attributable to ERISA plan assets are functional fiduciaries under ERISA. As applied to actual proxy voting authority, this statement can be seen as consistent with the DOL’s long-held position (that it first articulated in a 1988 opinion letter issued to Avon[2]) that “the fiduciary act of managing plan assets which are shares of corporate stock…include[s] the voting of proxies appurtenant to those shares of stock.” But the Release would expand this principle beyond actual voting authority to apply to a broader set of proxy advisory services, including research and recommendations on how to vote.

According to the DOL in TR 2026-01, “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 five-part test.” This is a new interpretive position that effectively creates a rebuttable presumption that many typical proxy advisory arrangements are fiduciary in nature. It also cautions that “mere written disclaimers of such understanding are not necessarily determinative.”

TR 2026-01 goes further and states in categorical terms that ERISA’s fiduciary duties include “a bar on taking into account anything other than the exclusive purpose of providing benefits to participants and beneficiaries by maximizing risk-adjusted returns.” Notably, this position deviates from the tiebreaker standard in the 2022 rule, which permits consideration of collateral benefits as a tiebreaker when investments equally serve financial interests. Since the DOL has already announced that it will engage in a new rulemaking to replace the 2022 rule (where the tiebreaker standard was addressed), the Release’s categorical framing seems to indicate that the tiebreaker rule may be eliminated formally.

Finally, TR 2026-01 takes the position that state laws requiring proxy advisory firms to disclose when their recommendations take non-financial factors into consideration are “generally not preempted by ERISA.” The Release’s reasoning is that because ERISA already bars fiduciary proxy advisors from providing non-financial advice to ERISA plans, no ERISA plan should ever receive a disclosure under such a state law, and therefore the state law has no “connection with” or “reference to” any ERISA plan. Note, the DOL has not previously opined on whether state proxy advisor disclosure laws are preempted by ERISA, and it is unclear how a federal court would respond to this guidance.

The Five-Part Test as Applied to Proxy Advisors

The Release applies each prong of the five-part test to proxy advisory firms:

• Prong #1: Advice or recommendations as to the advisability of investing in, purchasing, or selling securities. According to the DOL, proxy advisory firms that prepare research and recommendations on how to exercise shareholder rights satisfy this prong. The critical distinction is between a proxy advisor giving recommendations (which satisfies this prong) and providing purely ministerial or administrative services (which does not). Most proxy advisory engagement letters that include recommendation services, should be expected to satisfy this prong as interpreted by TR 2026-01.
• Prong #2: Regular basis. The Release states that ongoing proxy advisory services rendered on an ERISA-covered plan’s behalf “on an ongoing basis” satisfy the regular-basis requirement. Arrangements limited to a single engagement or ad hoc consultations may avoid this prong, but the typical annual-cycle proxy advisory relationship will likely satisfy it.
• Prong #3: Mutual agreement, arrangement, or understanding. The existence of a contractual arrangement between a plan (or its asset manager) and a proxy advisory firm to provide advice regarding plan assets for a fee is a “relevant factor” in determining whether there is a mutual understanding. The Release specifically cautions that “mere written disclaimers of such understanding are not necessarily determinative.” This will be a significant focus, because a disclaimer purporting to negate a mutual understanding may be overridden by the course of dealing.
• Prong #4: Primary basis for investment decisions. The Release states that the existence of a fee-based contractual arrangement may itself be evidence that the advice will serve as a primary basis for investment decisions. Asset managers that adopt proxy advisor recommendations as their default voting policy (overriding only on a case-by-case basis) should evaluate this prong closely as it is interpreted under TR 2026-01. Managers that use proxy advisor research as one input among several, with independent vote-by-vote determinations, have a stronger argument that the advice does not serve as the primary basis.
• Prong #5: Individualized to the particular needs of the plan. The Release notes that proxy advisory services may be “a generalized policy or specific to each individual transaction or client.” Custom voting policies tailored to a particular ERISA plan’s investment policy statement clearly satisfy this prong. One-size-fits-all benchmark policies may not, although the Release’s overall framing suggests the DOL has potential concerns with many proxy advisory relationships.

Co-Fiduciary Liability under ERISA § 405

The fiduciary/non-fiduciary determination for a proxy advisor can have a ripple effect because if the proxy advisor is considered to be a fiduciary, the engaging entity faces potential co-fiduciary liability exposure under ERISA § 405 for the advisor’s voting decisions.[3] An asset manager that engages a non-fiduciary service provider has monitoring obligations under general ERISA prudence standards, but it does not face the heightened co-fiduciary liability regime. As evidenced by Spence v. American Airlines, Inc., 75 F. Supp. 3d 963 (N.D. Tex. 2025), courts are already scrutinizing the monitoring of proxy voting activities, and the absence of monitoring was a factor in the court’s finding of a loyalty breach, even where prudence was not breached (See here for our prior commentary on Spence). If proxy advisors are fiduciaries, the ERISA § 405 knowledge standard creates a duty to monitor proxy advisor voting for breaches that goes beyond the ordinary prudence standard applicable to non-fiduciary service providers.

Action Items for Fiduciaries

• Audit proxy advisor engagement letters against the five-part test. Determine whether existing arrangements create fiduciary status for the proxy advisor under the Release’s interpretation of the five-part test. Pay particular attention to whether the engagement letter creates a mutual understanding that advice will serve as a primary basis for voting decisions, and whether disclaimers are consistent with the actual course of dealing.
• Determine whether engagement letters delegate discretion. If the proxy advisor retains discretion over voting policies or the casting of votes, fiduciary status attaches regardless of the five-part test. Consider whether restructuring the arrangement to a recommendation-only model is appropriate.
• Assess ERISA § 405 co-fiduciary liability exposure. Where the proxy advisor may be deemed a fiduciary, implement monitoring protocols sufficient to demonstrate compliance with ERISA § 405, including review of proxy voting records, regular certifications/attestations, and documented evaluation of the advisor’s voting practices for non-pecuniary influence.
• Evaluate proxy voting policies for pecuniary-only compliance. Although the Release’s categorical framing is in tension with the tiebreaker standard that is still formally in effect, the practical reality is that the DOL is signaling a pecuniary-only enforcement posture. Fiduciaries should ensure proxy voting policies and practices are defensible under both the current regulation and a future pecuniary-only rule.
• Create a strong written record. Spence underscores the importance of maintaining contemporaneous records of proxy voting rationale, monitoring practices, and the economic basis for voting decisions.
• Enhance monitoring of investment managers’ proxy voting. Request and review annual proxy voting reports, certifications that managers are complying with proxy voting guidelines, and documentation of any use of proxy advisory firms.
• Assess structural conflicts. The Spence court focused on the “cross-pollination of interests” between the plan sponsor and its largest investment manager. Fiduciaries should evaluate whether similar conflicts might be alleged to exist in their own arrangements and adopt conflict management policies where warranted.
• Evaluate existing relationships with proxy advisors in light of potential DOL enforcement. Although it remains uncertain how courts will react to the DOL’s interpretive positions in TR 2026-01, fiduciaries should proactively review existing proxy advisory relationships to be prepared for potential DOL examinations. While DOL officials have previously stated that the agency does not intend to regulate through enforcement, that assurance may carry less weight where the agency has formally articulated a specific interpretive position through an official technical release that the field offices of the DOL’s Employee Benefits Security Administration (EBSA) may rely on in conducting examinations and investigations. Moreover, there is relevant precedent for this type of enforcement activity—during the first Trump administration, EBSA’s New York Regional Office launched an information request campaign in 2020 that asked plan sponsors and RIAs for information about their ESG investments.[4] Although these requests were characterized as distinct from formal enforcement actions, they demonstrated the agency’s willingness to use its investigative authority to scrutinize fiduciary practices in areas of policy focus, and it is reasonable to anticipate the possibility of a similar approach with respect to proxy advisory arrangements following TR 2026-01.
• Monitor state law developments. State proxy advisor disclosure laws are proliferating. Fiduciaries that engage proxy advisors operating in states with such laws should understand the interaction between these disclosure requirements and ERISA preemption, and they should consult counsel on compliance.
• Monitor DOL rulemaking. TR 2026-01’s pecuniary-only framing likely previews forthcoming rulemaking. Fiduciaries should watch for proposed rules in the near term that would amend the tiebreaker standard or expand the fiduciary definition for proxy advisors.