DOL Adopts Rule Clarifying Plan Fiduciaries' Proxy Voting Obligations
Commentary by Steven Lofchie
The DOL adopted a final rule setting forth the duties of plan fiduciaries as to voting proxies held by the plans.
The final rule amends ERISA Regulations Section 2550.404a-1 ("Investment Duties") to clear up the "persistent misunderstanding" that fiduciaries must vote all proxies. The DOL stated that this misunderstanding has resulted in plans unnecessarily spending money researching items of no material economic significance. The amended rule provides that fiduciaries must exercise proxy voting rights to serve the economic interests of plan participants. This obligation does not require fiduciaries to vote on every matter. The rule cautions that a fiduciary must "not subordinate the [economic] interests of the participants . . . under any plan to any non-pecuniary objective. . . ."
The final rule rescinds Interpretive Bulletin 2016-01, which the DOL stated no longer represents its view on how fiduciaries should exercise voting rights, as the bulletin could be read to imply an obligation for fiduciaries to vote all proxies.
The final rule will go into effect 30 days after its publication in the Federal Register.
Commentary
The amended requirements on voting by plan fiduciaries follow upon the DOL's recent rulemaking on the obligations of plan fiduciaries in making investment decisions: all decisions in respect of a plan's assets are to be made to maximize the economic benefits to the plan and without regard to other considerations; e.g., without regard to environmental, social and corporate governance (or "ESG") considerations.
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