The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in North Carolina is representative of a question we commonly receive related to shares of investments and voting rights. The advisor asked:
“When the terms of a 401(k) plan give participants voting rights with respect to shares of investments in the plan’s trust (proxy vote), what happens if the participants fail to cast their proxy votes?”
Highlights of Discussion
• Great question. Assuming the plan participant timely received all notices, prospectuses, financial statements and proxy solicitation, the terms of the plan document should address who or what entity assumes the voting responsibility when participants fail to give instructions.
• For example, many plan documents will specify the plan trustee as the entity to vote in lieu of receiving participant instructions. Alternatively, the plan may specify another plan fiduciary such as an investment manager.
• Additional guidance on this topic can be found in Department of Labor Interpretive Bulletin 08-2.
Conclusion
Proxy voting is a fiduciary responsibility. The procedure surrounding proxy voting within a 401(k) plan will be addressed in the governing plan document. Be sure to look there first for specific guidance.
The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2014 Columbia Management Investment Advisers, LLC. Used with permission.
