The Internal Revenue Service has announced relief from the “physical presence” requirement for the notarization or witnessing of participant and spousal consents to certain retirement plan elections during 2020 because of the COVID-19 pandemic.
Under I.R.C. §§ 401 and 417, certain elections by a participant in a qualified retirement plan, and certain required consents by the participant’s spouse (such as the designation of a beneficiary other than the surviving spouse), must be notarized or witnessed by a plan administrator. Treas. Reg. § 1.410(a)-21 allows some kinds of electronic notices and consents, but subsection (d)(6)(i) generally requires spousal consents to be signed in the “physical presence” of a notary or plan administrator. However, subsection(d)(6)(iii) provides that “the Commissioner may provide that the use of procedures under an electronic system is deemed to satisfy the physical presence requirement under paragraph (d)(6)(i) of this section, but only if those procedures with respect to the electronic system provide the same safeguards for participant elections as are provided through the physical presence requirement.”
In Notice 2020-42, 2020-26 I.R.B. 986 (6/22/2020), the Internal Revenue Service announced that during 2020, the physical presence requirement of Treas. Reg. § 1.410(a)-21(d)(6) is deemed to be satisfied:
- By a remote notarization using live audio-video technology that otherwise satisfies that requirements of participant elections under the regulations and is allowed by state law for remote notarizations; and
- By a remote witnessing by a plan administrator using live audio-video technology if:
(1) The individual who is signing (the participant or spouse) presents a valid photo ID to the plan representative during the live audio-video conference (transmitting a copy of the photo ID before or after the witnessing is not sufficient);
(2) The live audio-video conference allows for direct interaction between the individual and the plan representative (a recorded video of the person signing is not sufficient);
(3) The individual transmits by fax or other electronic means a legible copy of the signed document directly to the plan representative on the same date it was signed; and
(4) After receiving the signed document, the plan representative acknowledges that the signature has been witnessed by the plan representative in accordance with Notice 2020-42 and transmits the signed document (including the acknowledgement), back to the individual using a system that the individual can effectively access, with notice that the individual is entitled to a free printed copy upon request, as provided by § 1.401(a)-21(c).