What Is Proxy Voting in a 401(k) Plan?

Proxy voting is part of managing an investment when the shares being voted are ERISA plan assets. The first question is not how the ballot should be marked. It is who has legal authority to make that decision. Current DOL rules put shareholder-rights authority with the trustee by default, but proper direction, delegation to an investment manager, participant pass-through provisions and pooled-vehicle structures can move that authority elsewhere.^[1][3][4]

That makes proxy voting an:

authority problem first, policy problem second.

A plan can have an excellent proxy policy and still have a governance failure if the wrong person is making the decision.

Shareholder Rights Are Part of Managing Stock

29 CFR 2550.404a-1(d)(1) states that the fiduciary duty to manage plan assets consisting of stock includes management of the shareholder rights attached to those shares, including:

the right to vote proxies.^[1]

This is not merely a procedural rule.

It means a fiduciary cannot treat voting rights as:

• valueless paperwork
• a service-provider afterthought
• a corporate-governance hobby separate from investment management.

When the shares are plan assets, the attached rights are part of what is being managed.

The Economic Interest of the Plan Controls

Current regulation requires a fiduciary deciding whether and how to exercise shareholder rights to act:

• prudently
• solely in the interests of participants and beneficiaries
• for the exclusive purpose of providing benefits and defraying reasonable plan expenses.^[1][3]

The regulation also requires fiduciaries to act in accordance with the:

economic interest

of the plan and its participants and beneficiaries.^[1]

That is the anchor.

Proxy voting is not a separate permission to use retirement assets for unrelated objectives.

DOL's 2026 Guidance Sharpens the Financial Focus

Technical Release 2026-01, issued April 1, 2026, addresses proxy advisory services.^[2]

DOL states that management of proxy rights is fiduciary in nature and emphasizes that ERISA fiduciaries must manage those rights for the purpose of advancing participants' financial retirement interests.^[2]

The Release repeatedly frames the governing objective in terms of:

risk-adjusted financial return.^[2]

That makes the practical test straightforward:

What is the expected economic effect on the plan investment, after considering costs?

A political, social or ideological preference does not replace the ERISA analysis.

Voting Costs Count

A proxy vote can involve costs.

Examples:

• research
• legal review
• proxy-adviser fees
• staff time
• securities recall
• recordkeeping
• operational execution.

29 CFR 2550.404a-1(d)(2)(ii)(B) expressly requires consideration of costs.^[1]

A fiduciary therefore should not ask only:

Could this vote affect the company?

The better question is:

Is the expected economic significance worth the resources required to exercise the right?

Relevant Facts Must Be Evaluated

The current regulation requires fiduciaries to evaluate relevant facts forming the basis for a particular proxy vote or other exercise of shareholder rights.^[1]

That rejects two opposite shortcuts.

Shortcut 1

Vote every ballot the same way because:

that is the house policy.

Shortcut 2

Never vote because:

proxy voting is too small to matter.

A policy can organize decisions.

The relevant facts still matter.

The Fiduciary Must Monitor Voting Service Providers

The regulation expressly requires prudence and diligence in selecting and monitoring persons used to:

• exercise shareholder rights
• advise on votes
• provide research
• make recommendations
• provide proxy administration
• keep voting records.^[1]

That can include:

• investment managers
• proxy advisory firms
• custodians
• specialist voting vendors.

The provider's role determines the diligence needed.

Blind Reliance on a Proxy Adviser Is Not Permitted

29 CFR 2550.404a-1(d)(2)(iii) says a fiduciary cannot adopt a practice of following a proxy advisory firm's recommendations without first determining that the firm's voting guidelines are consistent with the fiduciary's ERISA obligations.^[1]

That is a strong rule.

Hiring an expert can improve:

• research
• scale
• consistency.

It does not convert:

expert recommendation

into:

automatic fiduciary answer.

Start With the Trustee

The regulation's authority map begins with the trustee.

Under 29 CFR 2550.404a-1(d)(4)(i), responsibility for exercising shareholder rights lies:

exclusively with the plan trustee

except where one of the specified authority changes applies.^[1]

That default is easy to overlook because many modern 401(k)s use:

• directed trustees
• investment managers
• pooled funds.

The default still matters because every deviation should be traceable to valid governing authority.

Named-Fiduciary Direction Can Change the Trustee's Role

ERISA Section 403 allows a trustee to be subject to proper directions from a named fiduciary when the plan structure supports directed authority.^[4]

In that case, the trustee may execute the voting direction rather than independently deciding the substance of the vote.

The authority map becomes:

named fiduciary decides → directed trustee executes

That is different from:

trustee independently decides.

Documents should make the distinction clear.

A 3(38) Delegation Usually Carries Proxy Authority

INV-133 explains the statutory Section 3(38) structure.

When relevant plan assets are delegated under ERISA Section 403(a)(2), current regulation gives the appointed investment manager:

exclusive authority

to vote proxies or exercise other shareholder rights attached to those assets.^[1]

That is the ordinary rule.

It prevents a basic contradiction:

manager controls the stock but someone else casually controls an economically important right attached to the stock.

Proxy Authority Can Be Reserved

The regulation permits an important exception.

The:

• plan
• trust document
• investment-management agreement

can expressly reserve some or all shareholder-rights authority to an authorized named fiduciary.^[1]

Example:

Delegated manager handles:

• routine director elections
• ordinary compensation matters
• standard shareholder proposals.

Named fiduciary reserves:

• mergers
• tender offers
• extraordinary corporate actions.

That structure can work if the governing documents support it.

The reservation should be explicit.

Do Not Infer Authority From Job Titles

Imagine this arrangement:

• investment committee
• 3(38) manager
• directed trustee
• custodian
• recordkeeper
• proxy adviser.

Who votes?

The answer is not:

whoever has the proxy software.

The answer comes from:

1. plan document
2. trust agreement
3. investment-manager appointment
4. explicit reservations
5. participant pass-through terms
6. actual asset ownership.

Operational access is not legal authority.

Example: Separate Account With a 3(38) Manager

Plan has:

$200 million U.S. Equity Separate Account

Its Section 3(38) fiduciary has discretionary authority to:

• buy
• sell
• hold

the securities.

Unless the governing documents expressly reserve the relevant shareholder rights, that fiduciary generally also controls:

• proxy voting
• other shareholder-rights decisions.^[1]

The committee's role shifts toward:

• selecting the provider
• defining the mandate
• monitoring performance and compliance.

It should not re-vote every ballot after valid delegation.

Reservation Can Be Narrow

A plan does not need an all-or-nothing structure.

Example:

The delegated fiduciary has ordinary voting authority.

Named fiduciary reserves only:

tender rights involving employer securities.

The regulation permits reservation of:

some or all

shareholder rights if the authority structure is valid.^[1]

Narrow reservation can preserve specialized oversight without dismantling the manager's ordinary authority.

Reservation Can Also Create Coordination Risk

Suppose the delegated fiduciary believes:

vote against transaction

while the named fiduciary reserved the vote and decides:

vote for transaction.

That difference can affect:

• hold/sell decision
• portfolio risk
• tender strategy.

If voting authority is separated from investment authority, the mandate should address communication.

Splitting rights can solve one governance concern and create another.

Proxy Policies Are Permitted

Current regulation permits fiduciaries to adopt proxy-voting policies with specific parameters when those parameters are prudently designed to serve the plan's interests.^[1]

A policy can address:

• director elections
• compensation
• mergers
• capital structure
• shareholder proposals
• voting thresholds
• research requirements.

The policy can improve consistency.

It does not eliminate fiduciary responsibility.

Policies Must Be Reviewed Periodically

29 CFR 2550.404a-1(d)(3)(ii) requires periodic review of adopted proxy-voting policies.^[1]

That matters because:

• market structure changes
• portfolio holdings change
• proxy issues change
• service providers change
• costs change.

A policy written five years ago can become stale even if every vote technically followed it.

A Policy Cannot Preclude Economically Important Voting

The regulation does not allow a policy to block a vote when the fiduciary prudently determines that the matter is expected to have a significant effect on:

• investment value
• portfolio performance

after taking costs into account.^[1]

That prevents a policy from becoming:

this category is never voted.

If the specific matter is economically significant, facts override an overbroad shortcut.

A Fiduciary Can Also Refrain From Voting

The current rule also permits refraining when the fiduciary prudently determines that a matter is not expected to have a significant economic effect after considering costs.^[1]

That is a more precise statement than:

every proxy must always be voted.

The 2022 rule removed an older sentence explicitly saying fiduciaries do not have to vote every proxy, but the operative regulation still allows cost-conscious non-voting within a prudent policy framework.^[1][8]

The analysis remains economic.

Example: Routine Vote in a Tiny Holding

Plan-level separate account holds:

$25,000

of Company A.

The portfolio itself is:

$500 million.

Proxy issue is a routine procedural proposal.

Research and special legal review would cost:

$5,000.

The fiduciary can reasonably conclude that the expected economic impact does not justify the incremental cost.

That decision should be based on facts.

Not indifference.

Example: Merger Vote in a Material Holding

Plan owns:

$30 million

of Company B.

Company proposes merger expected to materially affect:

• share value
• liquidity
• portfolio exposure.

The potential economic effect dwarfs the cost of research.

A generic policy saying:

do not vote merger proposals

would be difficult to reconcile with the regulation's requirement that policy not preclude voting when significant investment impact is expected.^[1]

Participant Pass-Through Rights Are Different

29 CFR 2550.404a-1(d)(5) says the proxy-voting provisions in paragraph (d) do not apply to voting, tender and similar rights that are passed through under an individual account plan to participants and beneficiaries holding the relevant shares.^[1]

That is a distinct structure.

The plan says, in effect:

this right belongs to the participant under the plan's terms.

The participant can then make the decision within those procedures.

Pass-Through Is Not Automatic

A participant owning an investment through a 401(k) should not assume:

shares appear in the account, so every proxy ballot must be passed through.

Whether rights are passed through depends on:

• plan terms
• investment structure
• applicable tax/ERISA rules
• trust arrangement.

Employer-stock plans frequently use participant voting procedures.

Other investment options often do not.

Employer Stock Makes Pass-Through More Visible

INV-136 covers employer stock.

A plan can hold employer shares in participant accounts or through a unitized employer-stock fund.

Voting procedures can translate participant interests into:

• direct-share voting
• equivalent-share voting
• instructions to trustee.

The governing plan and trust provisions determine the mechanics.

Unitized ownership does not necessarily mean one plan unit equals one corporate vote.

Uninstructed Shares Need a Rule Too

Suppose only:

65%

of participant-directed employer-stock voting instructions are returned.

What happens to the other:

35%?

Possible plan/trust provisions may address:

• trustee discretion
• proportionate voting
• non-voting
• another specified approach

subject to applicable law.

The plan should know the answer before the record date.

Voting governance includes uninstructed shares.

A Mutual Fund Creates a Different Ownership Layer

Suppose the 401(k) offers:

ABC S&P 500 Mutual Fund.

Participants choose the mutual fund.

The mutual fund owns shares of:

• Apple
• Microsoft
• Company X
• hundreds of other issuers.

Does the plan committee vote Company X's proxy?

Generally:

no.

ERISA Section 401(b)(1) provides that a plan's ownership of shares issued by a registered investment company does not, solely because of that investment, make the fund's underlying assets plan assets.^[6][11]

Portfolio-Company Votes Stay Inside the Mutual Fund

The registered fund—or its adviser acting under fund governance—handles shareholder rights attached to the portfolio companies it owns.

The retirement plan owns:

mutual-fund shares.

It does not directly own:

every stock inside the fund

as ERISA plan assets solely because of the fund investment.^[6]

That makes the plan's role different from a separately managed account holding stocks directly.

The Plan Can Still Have Rights Attached to Its Fund Shares

There is another level.

A mutual fund itself can hold shareholder meetings involving matters such as:

• director elections
• changes requiring shareholder approval
• reorganizations.

The trust can have voting rights attached to:

the mutual-fund shares the plan owns.

That is distinct from voting:

Company X shares held inside the fund's portfolio.

Keep the two layers separate.

Form N-PX Adds Transparency to Fund Voting

Registered funds file annual proxy-voting records on:

Form N-PX.^[10]

That can let fiduciaries and investors examine how a fund voted portfolio-company proxies.

This does not transfer voting authority to the 401(k) sponsor.

It creates transparency around how the fund exercised its own rights.

A sponsor evaluating a fund can use those records when relevant to the economic and governance assessment.

A CIT Creates a Different ERISA Structure

INV-139 covers collective investment trusts.

A bank CIT can pool assets from multiple ERISA plans.

Unlike the registered-mutual-fund boundary, the underlying assets of a qualifying bank collective trust can be plan assets under ERISA's plan-asset framework.

That makes the CIT manager's shareholder-rights authority more directly tied to plan fiduciary duties.

The pooled structure creates its own problem:

different plans can have different proxy policies.

The Regulation Anticipates Conflicting CIT Policies

29 CFR 2550.404a-1(d)(4)(ii) addresses pooled investment vehicles holding assets of more than one employee benefit plan.^[1]

If participating plans have conflicting proxy policies, the investment manager generally must reconcile them where possible.

For proxy votes, and to the extent permitted by applicable law, the manager must vote or abstain:

in proportion to each plan's economic interest

to reflect the differing policies.^[1]

This is a sophisticated but practical rule.

Example: Proportionate Voting

CIT owns:

1,000,000 shares

of Company C.

Two plans are economically responsible for the relevant interests:

Plan A

60% of economic interest.

Policy:

vote for proposal.

Plan B

40%.

Policy:

vote against.

Where legally and operationally permitted, the manager can reflect those policies proportionately:

• 600,000 equivalent shares for
• 400,000 against.

The pooled vehicle does not have to pretend the policies agree.

A Pooled Manager Can Use One Policy Instead

The regulation gives another route.

A pooled investment manager can develop its own ERISA-compliant investment policy, including proxy voting, and require participating plans to accept it before investing.^[1]

Now the plan fiduciary's job is:

evaluate the manager's policy before selecting or retaining the vehicle.

That can simplify pooled administration.

It also means the investing plan has accepted less customized voting control.

One CIT Policy Can Be Rational

Imagine a CIT with:

800 participating plans.

If every investor brings a unique proxy policy, voting administration becomes expensive and fragmented.

The manager can instead say:

all investors accept this ERISA-compliant voting policy as a condition of participation.

A plan that disagrees can:

• choose another vehicle
• use a separate account
• negotiate another structure.

Standardization is part of pooled investing.

A Separate Account Allows More Custom Voting

INV-146 explains separate accounts.

A one-plan portfolio can specify:

• custom voting policy
• reserved issues
• proxy adviser
• recall procedures
• reporting.

That flexibility is one benefit of a dedicated mandate.

It also requires more governance.

The plan cannot ask for customization and then fail to monitor how it operates.

Securities Lending Can Temporarily Move the Vote

INV-149 explains securities lending.

When shares are lent, voting rights generally travel with the shares while the loan remains open.^[9]

That creates a direct conflict between:

• lending revenue
• voting opportunity.

If a vote becomes economically important, the portfolio can need to recall the securities before the relevant deadline.

Recall Has a Price

Assume a hard-to-borrow stock earns:

8% annualized lending fee.

A material merger vote occurs.

Manager recalls the stock for:

10 days

to regain voting rights.

Simplified foregone annualized-fee amount on:

$5 million

of securities:

$5,000,000 × 8% × 10/365 ≈ $10,959.

The vote is not free.

The manager should compare the expected economic importance of voting with the lost lending economics and operational costs.

A Material Vote Can Easily Justify Recall

Suppose the same:

$5 million

holding faces a merger where the vote could influence a value difference of:

5%.

Economic exposure:

$250,000.

Foregone lending revenue:

roughly $11,000 in the simplified example.

The scale supports serious recall analysis.

The decision still depends on:

• ability to influence outcome
• vote materiality
• timing
• portfolio plan.

But the economics are no longer trivial.

Routine Votes Can Produce the Opposite Result

Holding:

$1 million

Hard-to-borrow fee:

12%.

Vote:

routine administrative item with minimal expected economic effect.

Recalling can sacrifice meaningful lending income for little expected benefit.

A well-designed policy can let the manager avoid reflexive recall.

Shareholder rights and securities lending should be governed together.

DOL's 2026 Proxy-Adviser Guidance Is a Major Current Development

Technical Release 2026-01 directly addresses proxy advisory firms.^[2]

DOL says a firm can become an ERISA fiduciary through at least two distinct routes.

Route 1: Discretion over shareholder rights

The firm actually decides or controls how shareholder rights that are plan assets will be exercised.

Route 2: Investment advice for a fee

Firm provides proxy-related investment advice that satisfies the five-part fiduciary-advice test.^[2][7]

Those routes should not be collapsed.

Discretion Over Votes Creates Functional Fiduciary Status

ERISA Section 3(21)(A)(i) is functional.

A person is a fiduciary to the extent the person exercises authority or control over plan-asset management or disposition.

Technical Release 2026-01 applies that functional test to proxy firms: when the provider actually controls the exercise of plan shareholder rights, fiduciary status follows for that function.^[2]

Example:

Proxy firm does not merely recommend.

It has authority to:

cast the votes automatically.

That is materially different from research alone.

Advice Can Create Fiduciary Status Without Voting Control

The second route uses ERISA Section 3(21)(A)(ii).

The restored five-part test asks whether the person provides:

1. advice about value or advisability of transactions
2. on a regular basis
3. pursuant to a mutual agreement, arrangement or understanding
4. that the advice will serve as a primary basis for decisions
5. individualized to the plan's needs

for direct or indirect compensation.^[2][7]

A proxy adviser can satisfy that test even if someone else clicks:

submit vote.

DOL Says Ongoing Customized Proxy Advice Ordinarily Fits

Technical Release 2026-01 says that, in general, proxy advisory services addressing how to exercise shareholder rights:

• based on the particular needs of an ERISA plan
• on an ongoing basis
• for a fee
• under the relevant mutual understanding

will ordinarily satisfy the five-part test, subject to the facts and circumstances.^[2]

That is materially stronger than saying:

proxy advice might sometimes be fiduciary advice.

DOL is telling plans to examine the relationship seriously.

Contract Labels Do Not Control the Functional Test

A proxy-adviser agreement might state:

The firm is not an ERISA fiduciary.

Technical Release 2026-01 cautions that disclaimers are not necessarily determinative.^[2]

If actual facts show:

• ongoing individualized recommendations
• relationship of trust
• primary reliance
• compensation

the disclaimer does not erase the functional analysis.

ERISA looks at conduct.

Not just the heading of the contract.

A Research Vendor Can Still Be Nonfiduciary

The 2026 Release does not mean every proxy-data provider is automatically an ERISA fiduciary.

Consider a vendor that:

• sells standardized issuer data
• publishes generalized research
• has no plan-specific relationship
• has no voting discretion.

That arrangement may fail parts of the five-part test.

The analysis remains functional.

The article's point is not:

all proxy advisers are fiduciaries.

It is:

the common plan-specific ongoing advisory model can be.

Proxy Adviser vs. Voting Agent

A service provider can occupy different roles.

Research-only vendor

Provides information.

Recommendation provider

Suggests how to vote.

Administrative voting agent

Transmits votes according to someone else's instructions.

Discretionary voting manager

Determines and casts votes.

One company can perform several roles.

Fiduciary status should be analyzed function by function.

Administrative Execution Alone Is Not the Same as Discretion

Suppose custodian receives instruction:

vote FOR proposal 3.

Custodian mechanically transmits:

FOR.

That is different from custodian deciding:

proposal 3 should receive FOR.

Execution is not the same as investment judgment.

The contract and actual process should distinguish:

• decision
• instruction
• execution.

A Recordkeeper Can Be Involved Without Owning the Vote

A recordkeeper can:

• identify participant holdings
• distribute employer-stock ballots
• tabulate instructions
• transmit results to trustee.

That operational role does not automatically mean the recordkeeper has discretion over the underlying vote.

The authority question remains:

who decided how the shares should be voted?

Proxy Guidelines Should Match the Mandate

Suppose 3(38) manager has authority over:

U.S. large-cap equity separate account.

Proxy policy should reflect:

• investment horizon
• portfolio strategy
• economic objectives
• plan interests.

Blindly importing a general-purpose policy written for:

• endowments
• public pension funds
• activist investors

can create a mismatch.

The policy should serve the ERISA mandate.

A Fiduciary Should Understand the Adviser Methodology

Useful diligence questions:

• What data is used?
• How are economic effects assessed?
• Which policies are default?
• Can the plan customize them?
• Who resolves ambiguous ballots?
• How are conflicts managed?
• Does the adviser sell consulting services to issuers?
• How are errors corrected?
• How quickly can votes be changed before cutoff?
• Who has final voting discretion?

A brand-name proxy adviser is not a substitute for methodology review.

Conflicts Need Attention

Potential conflicts can arise if a proxy adviser:

• advises investors how to vote
• sells governance consulting to issuers
• has affiliated business relationships
• uses methodologies that benefit another part of its business.

A conflict does not prove the recommendation is wrong.

It changes the diligence required.

ERISA's loyalty duty does not disappear because the service provider has scale.

Proxy Voting Records Should Be Usable

A fiduciary overseeing direct plan-asset voting should be able to determine:

• what was voted
• how
• under which policy
• by whom
• whether an exception occurred.

That does not mean writing a memo for every routine ballot.

It means the governance system should be auditable.

A policy without records cannot be meaningfully monitored.

Exception Reporting Is More Useful Than a 5,000-Page Vote Dump

Large portfolios can cast thousands of ballots.

Committee members do not need to reread each one.

Useful reporting can focus on:

• votes against management
• policy exceptions
• contested elections
• merger/tender decisions
• recalls from securities lending
• proxy-adviser overrides
• material conflicts.

Monitoring should identify decisions that deserve attention.

Not bury them.

A Policy Override Is Not Automatically a Failure

Suppose policy ordinarily supports independent board chairs.

Specific company facts show:

• unusual transition
• strong lead independent director
• temporary executive succession issue.

Manager votes differently from default policy.

That can be prudent if supported by relevant facts and economic analysis.

A policy is not fiduciary autopilot.

Refusing to Override Can Be the Failure

The reverse matters too.

A fiduciary says:

The policy required it, so there was nothing to decide.

If specific facts make the policy result economically imprudent, blind adherence can be the problem.

ERISA duty runs to:

participants and beneficiaries

not to the proxy manual.

Mutual-Fund Voting Is Monitored Differently

A 401(k) fiduciary selecting a mutual fund usually does not approve each portfolio-company vote.

It can still evaluate the investment manager's:

• stewardship philosophy
• proxy record
• conflicts
• economic rationale

when material to the selection/monitoring decision.

Form N-PX provides one source.^[10]

The sponsor monitors the fund.

It does not become the fund's proxy desk.

CIT Voting Is More Directly Contractual

For a CIT, fiduciary review should identify:

• whether manager uses one pooled policy
• whether custom plan policies are accepted
• whether proportionate voting is operationally possible
• what happens when policies conflict
• whether securities are lent
• how recalls work.

These questions belong in:

• declaration of trust
• investment-management materials
• manager diligence.

The plan should know before investing.

Separate Accounts Offer Maximum Control—and Responsibility

A one-plan separate account can reserve or customize:

• voting authority
• policy
• proxy adviser
• recall standards
• issuer engagement.

That flexibility can be useful for a very large plan.

It also removes the excuse:

the pooled fund controls this.

Customization means someone must own each decision.

Participant-Directed Plan Does Not Mean Participant-Directed Proxies

This is one of the easiest misconceptions.

Participant chooses:

Fund A.

That does not imply the participant chooses:

how Fund A votes Apple.

Participant direction applies to the investment choice.

Proxy authority depends on:

• legal ownership
• plan terms
• investment wrapper.

The investment decision and shareholder-rights decision can sit at different layers.

Section 404(c) Does Not Solve the Proxy Authority Map

ERISA Section 404(c) can provide transaction-specific relief when participants exercise control over their account investments.

That does not answer:

who votes plan-owned shares?

Nor does it eliminate fiduciary duties attached to:

• selecting plan investments
• appointing managers
• monitoring proxy service providers.

INV-132 covers the participant-control boundary.

Proxy Voting and Employer Securities Require Extra Care

Employer stock can create:

• corporate fiduciary overlap
• inside-information concerns
• participant voting
• tender decisions
• securities-lending issues.

The plan should separate:

Corporate role

Executive or director duties to company.

ERISA role

Duties to plan participants.

The same individual can wear both hats.

The fiduciary standard changes with the function.

Tender Rights Are Related but Not Identical

Proxy voting is one shareholder right.

Other rights can include:

• tender
• exchange
• consent
• appraisal
• rights offerings.

29 CFR 2550.404a-1(d) addresses shareholder rights broadly.^[1]

A governance map that only says:

proxy voting = manager

can still be incomplete.

The mandate should address significant related rights.

Example: Tender Offer Reserved to Committee

Separate-account manager normally controls proxies.

Plan document validly reserves:

tender rights

to named fiduciary.

Company launches tender offer.

Manager remains responsible for:

• portfolio analysis
• recommendations within mandate.

Named fiduciary owns the final tender instruction.

The reservation should be documented before the event.

Emergency improvisation is poor governance.

Example: Proxy Adviser With Auto-Vote

Plan hires proxy firm.

Contract says:

• firm applies plan-specific policy
• firm automatically submits votes
• committee can override before deadline.

The proxy firm is exercising practical control over plan shareholder rights unless overridden.

Under Technical Release 2026-01, that authority/control can make the firm a functional ERISA fiduciary.^[2]

The committee should not treat it as merely:

software.

Example: Research-Only Service

Vendor sends:

• issuer data
• standard analysis
• no recommendation
• no individualized plan policy
• no voting authority.

Investment manager decides each ballot.

That service can present a very different fiduciary-status analysis.

Same industry.

Different function.

Example: Ongoing Customized Advice

Proxy adviser meets quarterly with plan fiduciary.

It:

• builds plan-specific voting policy
• recommends votes
• updates guidance based on plan holdings
• is paid annual fee.

Final votes are submitted by trustee.

Technical Release 2026-01 says arrangements of this type can ordinarily satisfy the five-part investment-advice test when the required relationship and facts are present.^[2][7]

No voting discretion is required for the advice route.

Trustee vs. Named Fiduciary vs. 3(38) Manager vs. Participant

The service-provider label never replaces the authority map.

Mutual Fund vs. CIT vs. Separate Account

The wrapper determines where the vote lives.

Execution Control vs. Proxy Advice

Technical Release 2026-01 makes function more important than title.

Vote vs. Refrain

This is not a formula.

It is a disciplined economic framework.

Proxy Policy vs. Ballot Judgment

A policy is infrastructure.

Judgment remains.

What Should a Participant Check?

Most participants do not need to monitor thousands of corporate ballots.

Useful questions are narrower:

1. Does the plan pass through voting rights for employer stock?
2. How are uninstructed shares handled?
3. If a mutual fund is selected, who votes its underlying portfolio securities?
4. Where can mutual-fund voting records be reviewed?
5. Does the employer-stock fund lend shares that may need recall before voting?
6. How are tender offers or extraordinary corporate actions communicated?

The participant's role depends on the investment.

What Should a Plan Fiduciary Review?

Authority

• trustee?
• named fiduciary?
• 3(38) manager?
• participant?
• pooled manager?

Documents

• plan
• trust
• investment-management agreement
• CIT documents
• employer-stock procedures.

Policy

• economic objective
• materiality
• costs
• proxy-adviser use
• recall standards
• exceptions.

Service providers

• research
• advice
• auto-voting
• execution
• recordkeeping
• fiduciary status.

Conflicts

• adviser conflicts
• manager affiliations
• corporate relationships
• employer-stock overlap.

Monitoring

• policy exceptions
• material votes
• recalls
• costs
• errors
• service-provider changes.

Authority first.

Everything else follows.

What Should Be Documented?

A useful file can include:

• authority map
• current proxy policy
• manager agreement
• proxy-adviser agreement
• service-provider fiduciary analysis
• annual or periodic voting report
• material exception report
• securities-lending recall report
• policy review date
• conflict disclosures.

Documentation should show the process.

It need not recreate every ballot from scratch.

What Should Ongoing Monitoring Test?

• Does actual voting authority still match the documents?
• Is the proxy policy current?
• Are service providers performing assigned functions?
• Has a proxy adviser moved from research into discretionary auto-voting?
• Are material recommendations blindly followed?
• Are conflicts disclosed and addressed?
• Are lending recalls working?
• Are pooled-vehicle policies still acceptable?
• Are participant pass-through procedures functioning?
• Are material exceptions escalated?

Authority drift can happen quietly.

Monitor the actual workflow.

Frequently Asked Questions

Is proxy voting a fiduciary function in a 401(k)?

Yes when the voting rights attach to shares that are ERISA plan assets. Current DOL regulation treats management of those shareholder rights as part of plan-asset management.^[1]

Who normally controls the vote?

The trustee is the regulatory starting point, subject to proper named-fiduciary direction, delegation to an investment manager and other valid structures.^[1][4]

Does a 3(38) investment manager vote proxies?

Generally yes for delegated plan assets, unless the plan, trust or investment-management agreement expressly reserves some or all shareholder-rights authority to an authorized named fiduciary.^[1]

Does the committee still need to approve each vote?

Not when voting authority has been validly delegated to the investment manager. The appointing fiduciary should monitor the manager rather than duplicate every investment decision.

Must every proxy be voted?

The current regulation allows proxy policies and permits refraining when the fiduciary prudently determines that the matter is not expected to have a significant effect on investment value or portfolio performance after costs.^[1]

Can the plan automatically follow a proxy adviser's recommendations?

No. The regulation says a fiduciary may not adopt that practice without determining that the provider's voting guidelines are consistent with ERISA duties.^[1]

Can a proxy advisory firm be an ERISA fiduciary?

Yes. DOL Technical Release 2026-01 says a firm that actually controls plan shareholder-rights decisions is a functional fiduciary, while fee-based proxy advice can separately satisfy the investment-advice fiduciary test depending on the facts.^[2]

Does a nonfiduciary disclaimer settle the issue?

No. DOL said in 2026 that disclaimers are not necessarily determinative where the actual relationship supports a fiduciary finding.^[2]

If a 401(k) owns a mutual fund, can the committee tell the fund how to vote Apple or Microsoft?

Generally no. The plan owns mutual-fund shares; ERISA Section 401(b)(1) generally prevents the fund's underlying portfolio assets from becoming plan assets solely because of the plan investment.^[6]

Can the plan vote its mutual-fund shares?

Potentially yes on matters presented to shareholders of the mutual fund itself. That is different from voting portfolio-company securities held inside the fund.

How does a CIT handle different plan voting policies?

Current regulation provides a proportionate approach where conflicting policies exist and applicable law permits, or the pooled manager can require investors to accept its ERISA-compliant policy as a condition of investment.^[1]

Do participants automatically vote employer stock?

Not automatically. Participant voting depends on the plan's structure, applicable rules and whether voting rights are passed through.

Does securities lending affect proxy voting?

Yes. Voting rights generally travel with shares on loan, so a manager can need to recall securities to vote a material matter.^[9]

Is recalling loaned stock free?

No. A recall can sacrifice lending revenue and create operational costs. The economic importance of the vote should be compared with those costs.

Can proxy voting pursue nonfinancial objectives?

ERISA fiduciaries must act for participants' retirement financial interests. Current DOL guidance emphasizes maximizing risk-adjusted financial returns rather than using plan shareholder rights for unrelated objectives.^[2][3]

Proxy-Voting Authority Test

Identify the shares whose rights are being exercised → determine whether those shares are ERISA plan assets → identify the trustee → determine whether the trustee is properly directed by a named fiduciary → determine whether relevant asset-management authority was delegated to a 3(38) investment manager → check whether governing documents expressly reserve any shareholder rights → identify participant pass-through voting or tender provisions → if a mutual fund owns the underlying securities, separate plan ownership of fund shares from the fund's portfolio-company voting → if a pooled CIT is involved, identify the manager's proxy policy and any conflicting-plan-policy process → identify proxy adviser, research vendor, custodian and voting-agent functions separately → determine whether any service provider has discretionary control over votes → apply the five-part advice test to plan-specific fee-based recommendations where relevant → review economic significance, costs and relevant facts → identify securities on loan and recall procedures → record material votes, overrides and conflicts → monitor the policy and every delegated provider periodically

The critical question is not:

"What is the plan's position on this proxy issue?"

It is:

"Who has authority over this shareholder right, what economic analysis governs the decision, and is that person actually performing the fiduciary function the documents assign?"

Get the authority wrong and the voting policy cannot fix it.

Sources & References

1. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.404a-1 — Investment Duties — https://www.law.cornell.edu/cfr/text/29/2550.404a-1
2. U.S. Department of Labor — Employee Benefits Security Administration: Technical Release 2026-01 — Application of ERISA Fiduciary Requirements and Preemption Provisions to Proxy Advisory Services — https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/technical-releases/26-01
3. Legal Information Institute / U.S. Code: 29 U.S.C. §1104 — Fiduciary Duties — https://www.law.cornell.edu/uscode/text/29/1104
4. Legal Information Institute / U.S. Code: 29 U.S.C. §1103 — Establishment of Trust — https://www.law.cornell.edu/uscode/text/29/1103
5. Legal Information Institute / U.S. Code: 29 U.S.C. §1102 — Establishment of Plan — https://www.law.cornell.edu/uscode/text/29/1102
6. Legal Information Institute / U.S. Code: 29 U.S.C. §1101 — Registered Investment Company Plan-Asset Boundary — https://www.law.cornell.edu/uscode/text/29/1101
7. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2510.3-21 — Definition of Fiduciary — https://www.law.cornell.edu/cfr/text/29/2510.3-21
8. U.S. Department of Labor — Employee Benefits Security Administration: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights — Final Rule — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rule-on-prudence-and-loyalty-in-selecting-plan-investments-and-exercising-shareholder-rights
9. U.S. Securities and Exchange Commission: Securities Lending by U.S. Open-End and Closed-End Investment Companies — https://www.sec.gov/investment/divisionsinvestmentsecurities-lending-open-closed-end-investment-companieshtm
10. U.S. Securities and Exchange Commission: Form N-PX — Annual Report of Proxy Voting Record — https://www.sec.gov/files/formn-px.pdf
11. U.S. Department of Labor — Employee Benefits Security Administration: Advisory Opinion 2009-04A — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2009-04a

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan investments, proxy voting, shareholder rights, trustees, investment managers, pooled funds, proxy advisory services and ERISA fiduciary duties. This article is not legal, fiduciary, securities, investment, tax or plan-administration advice. Proxy authority depends on the actual assets, governing plan and trust documents, investment-management agreements, pooled-fund terms, participant pass-through provisions, service-provider functions and current law. DOL Technical Release 2026-01 is current agency guidance as of the review date and should be read with the governing statute and regulation.

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