ERISA, or the Employee Retirement Income Security Act, aims to set standards for retirement and health plans and prevent potential abuse. Under ERISA, an audit of these plans must be done yearly by an “independent qualified public accountant.3”
The Department of Labor (DOL) has updated their guidelines regarding what establishes an independent accountant for ERISA health plan audits. The Department of Labor’s press release states that the DOL has removed or updated multiple existing provisions related to the audits1. They have also updated policies surrounding the financial interests of the auditor2.
The provisions of ERISA have been updated before to keep up to date with the standards of the accounting industry and other regulatory agencies, according to the new DOL bulletin. “Our goal in updating the Interpretive Bulletin is to make sure the Department of Labor’s interpretations in this area continue to foster proper auditor independence while also removing outdated and unnecessary barriers to plans accessing highly qualified auditors and audit firms” says Ali Khawar, acting assistant secretary of labor for employee benefits security.4
The changes include updated guidance about what constitutes a competing financial interest for auditors. Now auditors will be allowed to hold publicly traded securities of a plan sponsor during the period covered by the financial statements reviewed as long as they (and their immediate family and members of the firm have disposed of any holdings of such publicly traded securities prior to the period of professional engagement.”2
Previously, a “member” of a firm was defined by ERISA as someone “participating in the audit or located in an office of the firm.3” Now that many offices are remote, the agency has updated their guidelines to define an office as “a reasonably distinct subgroup within a firm, whether constituted by formal organization or informal practice, in which personnel who make up the subgroup generally serve the same group of clients or work on the same categories of matters regardless of the physical location of the individual.4”