In response to the COVID-19 pandemic and the related social distancing that has been implemented, the IRS is providing temporary relief from the physical presence requirement in Treasury Regulations Section 1.401(a)-21(d)(6) for retirement plan participant elections required to be witnessed by a plan representative or a notary public, including a spousal consent.
The IRS says the temporary relief, which covers the period from January 1 through December 31, is intended to facilitate the payment of coronavirus-related distributions (CRDs) and plan loans to qualified individuals, as permitted by Section 2202 of the Coronavirus Aid, Relief and Economic Security (CARES) Act. However, the temporary relief applies to any participant election that requires the signature of an individual to be witnessed in the physical presence of a plan representative or notary.
Notice 2020-42 provides participants, beneficiaries and administrators of qualified retirement plans and other tax-favored retirement arrangements with temporary relief from the physical presence requirement for any participant election witnessed by a notary public in a state that permits remote notarization or witnessed by a plan representative using certain safeguards.
In the case of a participant election witnessed by a notary public, for the period from January 1 through December 31, the individual may use an electronic system facilitating remote notarization if executed via live audio-video technology that otherwise satisfies the requirements of participant elections and that is consistent with state law requirements that apply to the notary public.
For the same period, in the case of a participant election witnessed by a plan representative, the individual may use an electronic system using live audio-video technology if the following requirements are satisfied:
- The individual signing the participant election must present a valid photo ID to the plan representative during the live audio-video conference, and may not merely transmit a copy of the photo ID prior to or after the witnessing;
- The live audio-video conference must allow for direct interaction between the individual and the plan representative (for example, a pre-recorded video of the person signing is not sufficient);
- The individual must transmit by fax or electronic means a legible copy of the signed document directly to the plan representative on the same date it was signed; and
- After receiving the signed document, the plan representative must acknowledge that the signature has been witnessed by the plan representative in accordance with the requirements of the notice and transmit the signed document, including the acknowledgement, back to the individual under a system that satisfies the applicable notice requirements.
According to the notice, Treasury Regulations Section 1.401(a)-21 sets forth standards for the use of an electronic medium to provide applicable notices to recipients or to make participant elections with respect to a retirement plan, an employee benefit arrangement or an individual retirement plan. Section 1.401(a)-21(e)(6) defines a participant election as any consent, election, request, agreement or similar communication made by or from a participant, beneficiary, alternate payee or an individual entitled to benefits under a retirement plan, employee benefit arrangement or individual retirement plan. Section 1.401(a)-21(d) sets forth the following conditions for participant elections:
- The individual must be effectively able to access the electronic medium used to make the participant election;
- The electronic system must be reasonably designed to preclude any person other than the appropriate individual from making the participant election;
- The electronic system must provide the individual making the election with a reasonable opportunity to review, confirm, modify or rescind the terms of the election before it becomes effective; and
- The individual making the election, within a reasonable time, must receive confirmation of the election through either a written paper document or an electronic medium under a system that satisfies the applicable notice requirements.