DOL Updates Guidance on Proxy Voting by Benefits Plans

The update is aimed at clarifying what the law requires of fiduciaries in regards to proxy voting and shareholder engagement in employee benefits plans.

The Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) has updated guidance for plan fiduciaries in regards to proxy voting by employee benefits plans. The DOL released Interpretive Bulletin 2016-01. This withdraws IB 2008-2 and reinstates earlier guidance related to such proxy voting. It also comes with specific updates aimed at clarifying what the law requires of plan fiduciaries.

Employee benefits plans often have large shares in publicly held companies. Therefore, the agency has long held that it is important for plan administrators to know what their responsibilities are when they vote proxies on those shares or exercise other shareholder rights. The DOL argues that existing guidance to plan fiduciaries has been out of step with domestic and international trends in investment management and has the potential to dissuade fiduciaries from exercising shareholder rights, including the voting of proxies, in areas that are increasingly being recognized as important to long-term shareholder value.

“Plan fiduciaries can often enhance and protect the interest of plan participants and beneficiaries by responsibly exercising their rights as shareholders,” says Phyllis C. Borzi, assistant secretary of labor for Employee Benefits Security. “This guidance removes perceived impediments to the prudent management of plans’ rights as shareholders, and encourages fiduciaries to manage those rights in the best interest of plan participants and beneficiaries.”

The new bulletin reinstates earlier guidance, IB 94-2, with key updates aimed at better assisting plan fiduciaries in understanding and meeting their obligations under the Employee Retirement Income Security Act (ERISA) with respect to proxy voting and shareholder engagement. The agency was also concerned that, despite the recent guidance on economically targeted investment issues provided in IB 2015-1, statements in IB 2008-2 may cause confusion as to whether or how a plan fiduciary may consider environmental, social and governance (ESG) issues in connection with proxy voting or undertaking other shareholder engagement activities.

The interpretative bulletin will be published in an upcoming edition of the Federal Register and can also be viewed at