Client Alert

IRS Provides Temporary Relief From Physical Presence Requirement For Participant Elections

In response to the public health emergency caused by the Coronavirus (COVID-19) pandemic and the related social distancing rules, for the period January 1, 2020, through December 31, 2020, IRS Notice 2020-42 provides temporary relief from the physical presence requirement for participant elections that are required to be witnessed by a notary public of a state that permits remote electronic notarization or witnessed by a plan representative.

Background

IRS regulations permit participant elections to be made electronically provided certain conditions are satisfied1. The regulations define 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. However, the regulations provide that, in the case of a participant election that is required to be witnessed by a plan representative or a notary public (such as spousal consent to a waiver of a qualified joint and survivor annuity, or requests for plan loans or distributions), the signature of the individual making the participant election must be witnessed in the physical presence of a plan representative or a notary public. Per section 1.401(a)-21(d)(6)(iii), the Commissioner can permit use of procedures under an electronic system deemed to satisfy the physical presence requirement so long as it provides the same safeguards for participant elections as are provided through the physical presence requirement.

Temporary Relief under Notice 2020-42

  • Relief from the Physical Presence Requirement for any Participant Election Witnessed by a Notary Public

In the case of a participant election witnessed by a notary public, for the period from January 1, 2020, through December 31, 2020, the physical presence requirement is deemed satisfied for an electronic system that uses remote notarization if executed via live audio-video technology that otherwise satisfies the requirements for electronic participant elections and is consistent with state law requirements that apply to the notary public.

CHEIRON OBSERVATION: This relief is useful only for participants in states that have implemented electronic notarization procedures.

  • Relief from the Physical Presence Requirement for any Participant Election Witnessed by a Plan Representative

In the case of a participant election witnessed by a plan representative, for the period from January 1, 2020, through December 31, 2020, the physical presence requirement is deemed satisfied for an electronic system if the electronic system using live audio-video technology satisfies the following requirements:

      • 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 was witnessed by the plan representative in accordance with these requirements and transmit the signed document, including the acknowledgement, back to the individual under a system that also permits the participant to request and receive a paper copy at no charge.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.


1 Section 1.401(a)-21(d) sets forth the applicable conditions for participant elections to be made electronically.