Independence for auditing employee benefit plans updated

ARTICLE | October 25, 2022

Authored by RSM US LLP

The U.S. Department of Labor’s (DOL) Employee Benefits Security Administration has released Interpretative Bulletin 2022-01, Interpretative Bulletin Relating to the Independence of Employee Benefit Plan Accountants, which updates the independence requirement for accountants who audit employee benefit plans (EBP) under section 103(a)(3)(A) of the Employee Retirement Income Security Act. The changes update Interpretative Bulletin 1975 that sets out the guidelines for independence of auditors of EBPs.

The revisions broadly focus on removing certain outdated and unnecessarily restrictive provisions, and to reorganize other provisions for clarity, including:

• Introducing an exception for new audit engagements so that an accountant or firm is not disqualified from accepting a new audit engagement merely because of holding publicly traded securities of a plan sponsor during the period covered by the financial statements. This exception is available as long as the accountant, accounting firm, partners, shareholder employees, and professional employees of the accountant's engagement office, and their immediate family have disposed of any holdings of such publicly traded securities prior to the period of professional engagement. This change applies to publicly traded securities only
• Introducing a new definition for the “period of professional engagement.” The period of professional engagement is defined as “the period beginning when an accountant either signs an initial engagement letter or other agreement to perform the audit or begins to perform any audit, review or attest procedures (including planning the audit of the plan's financial statements), whichever is earlier, and ending with the formal notification, either by the member or client, of the termination of the professional relationship or the issuance of the audit report for which the accountant was engaged, whichever is later”
• Introducing a new definition of “office” for the purpose of determining who is a ‘member’ of the audit firm for independence purposes so that the rules can be more applicable to current working circumstances. The new definition focuses on the substance of the involvement in the audit for the purpose of office classification, rather than the physical location of the individual. The updated definition of the term ‘office’ is modeled on the definition used in the American Institute of Certified Public Accountants (AICPA) independence standards.

The changes in Interpretative Bulletin 2022-01 became effective on September 6, 2022.